The_Economist_-_21st27th_March_2026_-_The_Economist

Why America and Cuba should cut a deal Britain’s chancellor reaches out to Europe How China is chasing fusion power Economists’ odd aversion to sex work MARCH 21ST–27TH 2026 Operation Blind Fury C002 -- 1 of 78 -- 3 The Economist March 21st 2026 Contents The world this week 5 A summary of political and business news Leaders 7 War in Iran Operation Blind Fury 8 Dislodging Hizbullah Lebanon’s last chance 8 African economies Open for business 9 Cuba’s future Dealing with Havana 10 Natural gas Lingering fumes Letters 11 On data centres in space, AI in Europe, taxing the rich, supermarket shopping, paranoia, China’s tech elite By Invitation 14 Oman’s chief diplomat: America has lost control of its foreign policy Briefing 15 The war on Iran Double deadlock 16 America’s armed forces Overstretched 18 Who runs Iran? No quarter United States 19 A weakened president 20 Tucker Carlson’s views 21 Democrats and the war 22 Farmers in pain 23 Securing the homeland 24 Lexington Does Trump care about the midterms? The Americas 25 Cuba’s broken economy Asia 28 America’s anxious allies 29 India’s gas panic 30 Banyan Mr Good Governance 31 Escaping Yangon 31 A deadly strike on Kabul China 33 Cheap energy for AI 34 Opinions of America 35 Still fighting air pollution 36 Chaguan China’s self-reliance Middle East & Africa 37 Aliko Dangote’s plans 38 War in Congo 39 African media 40 Israel and Hizbullah Contents continues overleaf ⏩ On the cover The reckless campaign against Iran will weaken Donald Trump. That will make him angry: leader, page 7. There is plenty of scope for the fighting to escalate, but no obvious way to end it, page 15. The war could sap American military power for years, page 16. The assassination of senior leaders weakens Iran, but also makes it less predictable, page 18. Despite all the bluster, Mr Trump’s war is weakening him, page 19. Tucker Carlson interview, page 20 Why America and Cuba should cut a deal It would be dirty, but better than the alternatives: leader, page 9. The regime that has controlled Cuba for over half a century has run out of options, page 25 Britain’s chancellor reaches out to Europe Rachel Reeves torches a decade of post-Brexit orthodoxies, page 45 How China is chasing fusion power It has made itself a serious contender in the race for commercial fusion, page 71. Is cheap energy the key to China gaining AI supremacy? Page 33. Understanding China’s drive for self-sufficiency, in energy and elsewhere: Chaguan, page 36 Economists’ odd aversion to sex work The sex economy is growing. It deserves serious analysis: Free Exchange, page 70 Buttonwood South Korea’s epic stockmarket bull run may survive the energy shock, page 69 → Download The Economist’s app for articles, podcasts, videos and more, published throughout the week. C002 -- 2 of 78 -- 4 The Economist March 21st 2026 Contents © 2026 The Economist Newspaper Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Newspaper Limited. The Economist (ISSN 0013-0613) is published weekly except combined issues in July and December, by The Economist Newspaper Limited, 900 3rd Avenue, 16th Floor, New York, NY 10022-5088. The Economist is a registered trademark of The Economist Newspaper Limited. Periodicals postage paid at New York, NY and additional mailing offices. POSTMASTER: Send changes to The Economist - Customer Service, 900 Third Avenue 16th Floor New York, NY 10022, USA. Canada Post publications mail (Canadian distribution) sales agreement no. 40012331. Printed by Fry Communications, Inc. 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Published since September 1843 to take part in “a severe contest between intelligence, which presses forward, and an unworthy, timid ignorance obstructing our progress.” Editorial offices in London and also: Amsterdam, Beijing, Berlin, Brussels, Cape Town, Chicago, Dubai, Lagos, Madrid, Mexico City, Montevideo, Mumbai, Nairobi, New Delhi, New York, Paris, San Francisco, São Paulo, Shanghai, Singapore, Taipei, Tokyo, Washington DC PEFC certified This copy of The Economist is printed on paper sourced from sustainably managed forests certified by PEFC www.pefc.org PEFC/29-31-296 Volume 458 Number 9491 Europe 41 The energy squeeze 42 How Hormuz helps Putin 43 Hungary’s baby bonuses 43 Reviving Irish 44 Charlemagne Lovers' tiff Britain 45 Reeves’s tilt to Europe 46 The cost of driving 47 Youth unemployment 50 Bagehot CBeebies International 51 African investment 54 The Telegram Trump’s gunboat diplomacy Business 55 Nvidia’s reinvention 57 Bankruptcy boom in America 57 Airlines’ Iran-war woes 58 BASF in trouble 59 AI v Indian IT firms 59 Zara goes upmarket 60 Bartleby Employee surveys 61 Schumpeter Elliott Management Finance & economics 63 Petrostates of America 64 American energy exports 65 The hit to China… 66 …and the poor world 67 The other commodities 69 Buttonwood Is KOSPI kaput? 70 Free Exchange Sex economics Science & technology 71 China’s race for fusion 72 Inference chips 73 Fast-charging EVs 74 Well Informed GLP-1s for longevity Culture 75 Tourism and geopolitics 77 Sparkling water 77 Leon Trotsky 78 Mafias 79 The Hotel Lutetia Economic & financial indicators 81 Statistics on 42 economies Obituary 82 Jürgen Habermas, champion of reasonable debate C002 -- 3 of 78 -- 5 The Economist March 21st 2026 The world this week Politics Israel killed Ali Larijani, Iran’s security chief and one of the most prominent remaining figures in the regime. Gholam- reza Soleimani, the head of the paramilitary Basij force, died on the same day. Iran’s intelligence minister was killed in a separate strike. Iran’s army chief vowed a “decisive” response to the assassination of Mr Larijani. Donald Trump condemned an attack by Iran on the Ras Laf- fan gas complex in Qatar and threatened to “massively blow up” Iran’s South Pars natural gas field if it struck Qatar again. Mr Trump claimed he had not been informed in advance of the Israeli strike on South Pars that preceded Iran’s attack on Qatar. Joe Kent, a senior American counterterrorism official, resigned over America’s war in Iran. Mr Kent, from the anti- war wing of MAGA, said that Iran posed “no imminent threat” to America. Mr Trump derided Mr Kent as being “very weak on security” and said it was a “good thing” he was out. At least three Palestinians were killed in the West Bank in the first deadly Iranian missile attack to hit the territory since the war began three weeks ago. Iranian missiles also struck the Emirati port of Fujairah, and Dubai’s airport. America hit dozens of Iranian military targets on Kharg Island, home to Iran’s main oil-export termi- nal, including storage depots for missiles and naval mines. The Israel Defence Forces (IDF) told people to evacuate southern Lebanon as it intensified its operation against Hizbullah, launching air strikes on central Beirut and south Lebanon. Israel has more than doubled the number of troops it has along the border with Lebanon and began destroying bridges over the Litani river, perhaps in preparation for a ground in- vasion. Over 950 people have been killed in Lebanon and almost 1m displaced since Israel’s latest campaign began. A former Belgian diplomat will face trial for his alleged involvement in the assassina- tion in 1961 of Patrice Lumum- ba, the first democratically elected prime minister of independent Congo. Étienne Davignon, 93, is the sole survi- vor of the ten Belgians accused by Lumumba’s family of com- plicity in his death. A parlia- mentary commission in Belgi- um, the former colonial power, had found that the country supported the killing. Denis Sassou-Nguesso will remain president of the Re- public of Congo after a farcical election marred by an internet blackout and suppression of the opposition. Official results say the 82-year-old, who has ruled the country since 1979 except for a five-year period in the 1990s, won 95% of the vote. Bobi Wine, a Ugandan opposi- tion leader, said he had left the country because he feared he would be killed by the govern- ment. Mr Wine’s exile follows the re-election in January of Yoweri Museveni, the president since 1986. The head of the Ugandan army, who is also Mr Museveni’s son, had threatened to kill Mr Wine in a string of now-deleted posts on X. Lend a hand? Donald Trump repeated his demands for NATO allies to help open up the Strait of Hormuz, to no avail. European leaders made it clear they would not get involved. Frie- drich Merz, Germany’s chan- cellor, said “we will not partici- pate in this war”; Emmanuel Macron, president of France, said that the country was “not a party to the conflict”. Later Mr Trump exclaimed on his Truth Social media platform that “WE DO NOT NEED THE HELP OF ANYONE!” France voted in the first round of mayoral elections. Marine Le Pen’s populist right and Jean-Luc Mélenchon’s populist left made gains. Emmanuel Macron’s centrists did poorly. Eric Ciotti, backed by Ms Le Pen, topped voting in Nice. The Socialist incumbent came first in Marseille. A tough race for Paris is, in effect, down to Emmanuel Grégoire, a Social- ist, and Rachida Dati, on the right. Final voting is due to take place on March 22nd. A spying scandal upended Slovenia’s election campaign ahead of polls on March 22nd. Mladina, a local news outlet, reported that operatives from Black Cube, an Israeli political- intelligence firm, met Janez Jansa, the country’s populist opposition leader. The report linked the company to the publication of videos that appeared to implicate govern- ment-linked figures in corrup- tion. They deny wrongdoing and say the videos were manipulated. Mr Jansa denied working with Black Cube, which did not respond to our request for comment. Better when we were together Rachel Reeves, Britain’s chancellor, said she wants closer alignment with the European Union to boost economic growth. Ms Reeves’s comments follow the Labour government’s “reset” with the EU since coming to office in 2024. The politics have changed since the Brexit refer- endum in 2016: Britons now clearly favour rejoining. Donald Trump said he may soon have the “honour of tak- ing Cuba”. Millions on the island were left without power for more than 24 hours amid a worsening energy crisis. No fuel has entered the Caribbean country since the United States imposed an oil embargo on it three months ago. Meanwhile, Rodrigo Chaves, the president of Costa Rica, announced the closure of the country’s embassy in Havana. Mr Chaves, a Trump ally, denied the legitimacy of the Cuban regime, adding that “we must cleanse the hemisphere of Communists.” Venezuela’s acting president, Delcy Rodríguez, sacked her defence minister in a sweeping cabinet reshuffle. Ms Rodrí- guez thanked Vladimir Padrino, the longest-serving military appointee under dicta- tor Nicolás Maduro, for “his loyalty to the homeland”. Mr Padrino will be replaced by Gustavo Gonzalez Lopez, the country’s intelligence chief. Ms Rodríguez has run Venezuela since Maduro’s capture by American special forces. Pakistan and Afghanistan agreed to pause fighting to mark Eid al-Fitr, the end of Ramadan. The temporary reprieve of four days comes after a Pakistani air strike on Kabul killed at least 143 people. The Taliban government claimed the attack hit a hospital and that the death toll was as high as 400. Pakistan denied this and said that its forces “precisely” targeted terrorist infrastructure. Mr Trump said he was postponing a visit to China as a result of the war with Iran. He had been due to travel to Beijing on March 31st to meet President Xi Jinping. Mr Trump says the trip will now take place in “about five or six weeks”. C002 -- 4 of 78 -- 6 The Economist March 21st 2026 The world this week Business The price of Brent crude, the global oil benchmark, rose above $115 a barrel as America and Israel continued their bombing campaign against Iran. The price of natural gas also climbed: the Dutch TTF price, the benchmark price for the fuel in Europe, hit €72 ($83) per megawatt hour, up from around €30 before the war. Prices increased sharply after Iranian missiles hit Ras Laffan, an industrial complex in Qatar that boasts the world’s biggest liquefied natural gas (LNG) plant. QatarEnergy, which runs the plant, said the strike caused “extensive dam- age”. Ras Laffan produces a fifth of the world’s LNG. Airlines warned that soaring fuel prices were pushing up their costs. The bosses of Del- ta, United and American Air- lines, three big American carri- ers, each said that their com- pany’s costs had risen by around $400m in March alone. SAS, Scandinavia’s biggest airline, is reducing its services. The price of jet fuel traded in Europe and in Singapore, Asia’s main hub, has more than dou- bled since the start of the war. The Federal Reserve left its main interest rate unchanged, between 3.5-3.75%. Traders are increasingly betting that Amer- ica’s central bank, which last cut rates in December, will keep them on hold until the end of the year, amid fears that rising energy costs could fuel inflation. Other central banks signalled caution on account of the war in the Gulf. The Bank of Japan held rates steady. Earlier the Reserve Bank of Australia lifted them by 0.25 percentage points, to 4.1%. Jensen Huang, Nvidia’s boss, gave a bullish presentation at the chipmaking titan’s annual developer conference. He predicted that the company would sell $1trn-worth of artifi- cial-intelligence (AI) kit by the end of 2027. Mr Huang un- veiled a specialised chip, built using technology from a start- up called Groq, for “inference” (the stage where AI models answer questions from users). Nvidia is eager to show that it is branching out into new pro- ducts: after a blistering rally last year, the company’s share price has fallen since the start of 2026, as investors fear the AI boom will not last. Who saw that coming? Arizona’s attorney-general accused Kalshi, a prediction market, of “running an illegal gambling operation”. Kalshi denied the charges. The com- pany argues that its contracts, which pay out depending on the outcome of an event, should be regulated as deriv- atives, rather than falling under gambling laws. Arizona is the first state to bring a criminal case against Kalshi. UniCredit made a €35bn ($40bn) bid for Commerz- bank, a smaller German rival. Andrea Orcel, the Italian bank’s boss, said the lowball offer (pricing Commerzbank’s shares at just 4% above their market value) would allow UniCredit to raise its stake in the lender. UniCredit hopes the offer will revive talks over its planned takeover of the bank. Commerzbank and Germany’s government both oppose the bid. BHP, the world’s biggest miner, named Brandon Craig as its next boss. He will take over on July 1st. The company veteran, who ran the Australian firm’s operations in Latin America, will replace Mike Henry. Mr Henry oversaw several un- successful attempts to buy BHP’s rival, Anglo American, during his six years in charge. Mr Craig wants to double down on copper—which overtook iron ore to become the firm’s most profitable metal last year—and deepen BHP’s oper- ations in the Americas. Tencent, China’s most valuable company, reported a 13% in- crease in revenue in the final quarter of last year, compared to the same period in 2024. The maker of WeChat, China’s biggest social-media app, has been working on integrating “agentic” AI services into its products, which allow users to automate tasks such as hailing rides and ordering food. In December it hired Yao Shunyu of OpenAI, a leading American lab, as its chief AI scientist. JD.com, a Chinese e-commerce giant, launched its online marketplace in Europe for the first time. Joybuy, which stocks products from big brands like Apple, aims to challenge Ama- zon. It hopes that offering same-day delivery deals to around 15m households on the continent will help it gain an edge on its American rival, which dominates e-commerce in Europe and America. Hover and out The share price of Swarmer, a Texas-based company that develops AI software for co- ordinating military drones, rose by more than 1,000% following its initial public offering on the Nasdaq on March 17th. Ukraine’s armed forces have used the company’s wares since 2024. The Trump administration has recently sped up the rush to develop American drone tech. Last year it all but banned imports of Chinese-made drones for national-security reasons. Natural-gas price* € per MWh Source: Bloomberg *Dutch TTF month-ahead 70 60 50 40 30 2025 2026 C002 -- 5 of 78 -- Leaders 7 The Economist March 21st 2026 NEVER BET against Donald Trump. No politician can defy political gravity like the man whose supporters stormed the Capitol on January 6th 2021, only for him to be re-elected in 2024 with a bigger share of the vote. And yet it is hard to imag- ine a crisis more precisely engineered to intercept the trajecto- ry of his presidency than his ill-judged, heedless war against Iran. Even a short war will alter the course of his second term. One that lasts months could bring it crashing to earth. The reason is that the fight against Iran diminishes Mr Trump’s three political superpowers: his ability to impose his own reality on the world, his remorseless use of leverage and his dominion over the Republican Party. Even without Iran, the potency of these Trumpian strengths was likely to wane after the midterm elections. Wars accelerate change. Start with Trump v Reality. In politics, the president has shown a remarkable ability to twist facts and, sure enough, he insists that he has already triumphed in Iran. Yet the war tells a truth of its own. Iran’s regime cannot win in any conventional sense. But despite widespread destruction of infrastructure and the assassinations of senior leaders—including the securi- ty chief, Ali Larijani—Iran’s regime survives for now and its 400kg or so of near-bomb-ready uranium remains at large. What is more, Iran is waging its own parallel war against the global energy industry. As it strikes ship- ping in the Strait of Hormuz and the infra- structure of its neighbours, the markets are keeping score. With Brent crude spiking to more than $110 a barrel on March 18th, follow- ing an Iranian missile attack on a Qatari natu- ral-gas hub, the regime will conclude that its strategy is working. If anything, time is on Iran’s side. America and Israel will gradually run out of useful targets to strike from the air, or run low on interceptor batteries to see off Iranian weapons. By contrast, Iran appears still to have plenty of drones. For as long as it restricts traffic in the strait, oil prices will climb and the damage to the world economy will grow. Mr Trump’s second superpower is leverage. Now that other countries’ leaders have come to expect rough treatment, they are learning how to resist. When the president called on Amer- ica’s allies to help open the strait, warning that NATO faced a “very bad” future if they refused, they turned him down. He quickly reversed course, pretending he had never needed help. Likewise, Iran is opposing Mr Trump by accumulating le- verage against him. In recent days it has signalled that it will grant safe passage through the Strait of Hormuz to ships from friendly countries—a sign that it means to use access as a bar- gaining tool. Even if Mr Trump wants to end the war, Iran could continue to fire at ships. If the waterway remains closed until the end of April, the oil price could reach $150 a barrel. Given that leverage, Iran may hold out for more than just a return to the status quo before the war. It may ask for sanctions to be lifted, or an American commitment to abandon some bases in the Middle East or to restrain Israel. If recession looms in America and stockmarkets start to fall, would Mr Trump escalate by, say, seizing Kharg island, home to Iran’s ex- port terminals? Or would he buckle? The answer depends partly on the last of his powers: his hold on his party. Mr Trump was elected on promises to spare voters from war and inflation. So far, 13 American service per- sonnel have died; ground operations inside Iran, to recover that uranium, or on Kharg would put many more in danger. Av- erage prices of petrol and diesel have reached $3.88 and $5.09 a gallon, compared with $3.11 and $3.72 at Mr Trump’s inaugu- ration. Republican support for the war is strong, but softening. A vocal faction of MAGA, notably Tucker Carlson (interviewed on “The Insider”, our video show, this week), talks of betrayal. In private many elected Republicans are seething (see Un- ited States section). Mr Trump’s failure to heed warnings about the Strait of Hormuz is typical of his contempt for strategy and his hubris in thinking he knows better than people who really do. Republicans are now highly likely to lose control of the House in the midterm elections in November. Their chances of losing the Senate too have risen by ten points, to about 50%. The worse the defeat, the lamer a duck the president will be and the less influence he will have over who inherits the party. Were the war to drag on, leading to very high oil prices and tumbling stockmarkets, Mr Trump could seek a way out and look for a win somewhere else—in, say, Cuba. Markets would doubtless register relief if the fighting stopped. But Mr Trump is not in full control of this war. Iran’s attack on the gas hub in Qatar shows it still has cards to play. And even if the fighting ended tomorrow it could take four to six weeks to restore oil produc- tion, four to eight weeks to settle oil markets and two months to normalise shipping. The risk of renewed Iranian action would remain. Prices may stay high for months. Every day they do weakens the president. Mr Trump’s politics depends on the strength that comes from winning. If he seems a loser, expect him to exact retribu- tion. A weaker president could become a more dangerous one. Tanking Mr Trump is freest to act abroad. He may abandon NATO. He may cut Ukraine loose to punish Europe. He could bully Latin America in the name of fighting crime and drugs. He may de- mand money for defending Japan and South Korea. He will be maximalist on tariffs. Even if he does not succeed, that will fur- ther erode America’s alliances, to the glee of China and Russia. But Mr Trump is also liable to lash out at home. He has al- ready endorsed the idea of withholding broadcasting licences from media outlets that criticise the war. He wants the Federal Reserve to slash rates, but his war makes that less likely— expect further clashes with the central bank. He could target perceived enemies or send immigration agents to more Demo- cratic-run cities. He could threaten to meddle in the midterms, either as theatre to rile his opponents, or because he intends to influence the results. It is hard to see how Mr Trump ends up a winner in Iran. Be warned: he makes a very bad loser. ■ The reckless campaign against Iran will weaken America’s president. That will make him angry Operation Blind Fury C002 -- 6 of 78 -- 8 The Economist March 21st 2026 Leaders ⏩ MORE OFTEN than not, Lebanon is a cautionary tale. Poor governance, foreign meddling and catastrophic econom- ic mismanagement have hollowed out the state. But the most destabilising force in the country has been Hizbullah, a fear- some militia backed by Iran. Lebanon’s government now has a chance to dislodge it. But it needs to act firmly, and fast. Hizbullah, long the most heavily armed non-state actor in the world and the most powerful military force in Lebanon, has never looked weaker. Israel has killed many of its leaders and destroyed tens of thousands of the missiles it has pointed at northern Israel. Its patron is now battling for its own surviv- al. Anger has grown among its Shia supporters in Lebanon at its failure to rebuild what Israel destroyed in the south of the country in 2024. Since Israel and America began their most recent war in Iran, Hizbullah has again been attacking Israel. In response, Israel has launched a devastating series of air strikes which have killed over 950 people and dis- placed more than a million. Israel aims to fi- nally smash Hizbullah. Instead, it risks reviv- ing it. In contrast to Israel’s campaign in 2024, which many Lebanese recognised to be an attack on Hizbullah, the scale of this assault makes it look like an attack on Lebanon itself. A ground incursion may be next (see Middle East & Africa sec- tion). Israel’s invasion in 1982 led to an 18-year occupation of southern Lebanon and the emergence of Hizbullah. Fighting a new wave of occupiers would help Hizbullah recover its grip. Israel should pause and give Lebanon’s government and army a chance to act. For years, that would have been incon- ceivable. Generations of Lebanese politicians and generals have prevaricated, reluctant to take on a militia that out- gunned and intimidated them. Israel’s leaders are currently split over whether to launch a large ground invasion. If the Lebanese government does not rise to the occasion, Israel may well conclude that it must re-establish deterrence itself, per- haps with a prolonged occupation of the south. Lebanon’s leaders are making the right noises. Joseph Aoun, the president, has vowed to disarm the group. On March 2nd Nawaf Salam, the prime minister, declared “all Hizbullah’s security and military activities” to be illegal and told it to hand over its weapons to the state. Dismantling Hizbullah’s power will be neither easy nor quick. But the government could start by ejecting the Iranian ambassador and severing diplomatic ties with Iran. Many Iranian “diplomats” in Lebanon are, in fact, members of Iran’s Islamic Revolutionary Guard Corps. The government should arrest Iranian commanders leading Hizbullah’s fighters on the ground. It must also close Al- Qard Al-Hassan, its financial network, and make clear that reconstruction financing for the south of the country will be made available and handled by the state. And it should enforce its own ban on Hiz- bullah’s military activity. Recently, armed Hizbullah suppor- ters were arrested and then freed on bail of just $21. The army should take control of the routes and facilities used to move weapons and fighters. And Lebanon’s army should eventually aim to move into areas long dominated by Hizbullah. Outsiders can help. Britain and France could share intelli- gence with Lebanon’s government; so could America. Their armies could train and equip the Lebanese armed forces and offer financial support to pay soldiers. But ultimately this is up to Lebanon’s leaders. If they move seriously against Hizbullah, they might at last break its grip on the state. If they hesitate yet again, Lebanon could face a destructive new occupation. ■ The country’s leaders must seize the opportunity to take on Hizbullah. Israel must not play the spoiler Lebanon’s last chance Dislodging Hizbullah YOU MIGHT think that Africa would be in the midst of a crisis. The four largest donors all cut their aid spending in Africa last year, according to initial data. America slapped some of its highest tariffs on African countries. China, the continent’s largest bilateral source of loans for most of the 21st century, today receives more from Africa in debt repayments than it extends in new credit. On top of all that, the war in Iran will increase the cost of fuel and fertiliser. Yet African countries look resilient. The IMF reckons that in 2026 economic growth will be higher in Africa than in Asia, hitherto a rare occurrence. Of the 15 fastest-growing countries anywhere, 11 are expected to be on the continent. The picture partly reflects high commodity prices and booming popula- tions. But it is also revealing of something more profound: the rise of Africa as a destination for investment, not charity (see International section). To be sure, there is not one Africa. Some of the continent is at war (Sudan) or unstable (the Sahel). But the most econom- ically important parts are not. Internal strife can co-exist with thriving industries even within the same country: take, for ex- ample, energy or fintech in Nigeria. And though aid remains vital to the budgets of the poorest places, for the larger econo- mies it is a rounding error. Before the outbreak of the third Gulf war, animal spirits were on something of a safari. In the first two months of 2026 the value of bonds issued by African countries on capital mar- The continent’s resilience in the face of aid cuts has been underestimated Open for business African economies C002 -- 7 of 78 -- 9 The Economist March 21st 2026 Leaders ▸ ⏩ kets was higher than during any equivalent period since 2013. The ratings of African sovereign bonds remain at a five-year high. Last year many African stockmarkets reached record highs. The price rises for fuel and fertiliser, and therefore food, caused by the war may stunt these movements. But there are three reasons to be optimistic that the investment case for Africa will continue to be promising. The first is that Africa is attracting a wider range of foreign investors than ever. In 2024 the continent received a record amount of foreign direct investment: at $97bn, about a third more than the inflow of aid. For both America and Europe, Af- rica has grown in importance as a source of critical minerals and a destination for infra- structure spending. The chaos in the Gulf may redouble European firms’ interest in African energy projects, whether oil, gas or renew- ables, a shift that began when Russian tanks rolled into Ukraine in 2022. China, though lending less, is trading at or near record levels with the continent. The Gulf states may re- think some of their investments, given the damage caused by the war, but they will still have an appetite for Africa’s agricul- tural and mineral riches. A second reason is that African policymakers have made their economies more resilient. Inflation slowed down in most countries last year in part because of prudent central bankers. Market-friendly reforms in Nigeria and South Africa will boost these large economies and their surrounding regions. Efforts to reduce intra-African barriers to trade, capital flows and movement of people are picking up. More than twice as much rail may be laid in the next ten years as in the past decade. The third reason for optimism is probably the most crucial: African investors are starting to put more of their capital into Africa. In 2024 the 500 largest African firms recorded their highest-ever revenues in dollar terms. As these firms grow, they are reinvesting in new projects. This trend is exemplified by Aliko Dangote, a Nigerian tycoon and Africa’s richest man, who has built a massive refinery complex outside Lagos and plans to expand across the continent (see Middle East & Afri- ca section). Last year local investors accounted for 45% of ven- ture-capital commitments in Africa, the highest-ever share. New rules in many places mean that some of the $1trn-plus on the balance-sheets of pension, insurance and sovereign-wealth funds will go to private equ- ity and infrastructure, not just bills and bonds. Africa still faces huge challenges. The flip- side of its demographic boom is that 15m young people will soon be entering the labour market every year, most of them without hope of a formal job. Electricity remains patchy and costly. Agricultural productivity, while im- proving, lags behind global averages. The share of children in primary school has stalled since 2010. Complacent African politicians are often reluctant to allow the rise of large busi- nesses that owe their success to entrepreneurship, rather than political connections. Too many corrupt autocracies opt to re- press restless populations rather than uplift them. Even so, it is time for the world to update how it thinks about Africa. The Middle East is at war again, Europe is slug- gish and America is run by its own would-be autocrat. As a re- sult, the continent is starting to seem less and less risky. Relatively speaking, Africa looks a safer bet than ever. ■ NOT SINCE the Cuban missile crisis in 1962 has the United States held so much power over Cuba’s fate. By taking control of the distribution of Venezuelan oil after capturing Nicolás Maduro, that country’s dictator, America cut Cuba off from its last reliable energy supplier. The threat of renewed ta- riffs has prevented other friendly countries, like Mexico, from stepping in. Many countries that employed Cuban doctors, and paid the regime directly for their service, have been bullied into sending them back, cutting off precious foreign currency. On March 16th the power went out across the whole of Cuba for the fourth time in five months. Protests are increasing. Temperatures are rising (see Americas section). Not for the first time, the goal of an American pressure campaign is unclear. “I do believe I’ll be…having the honour of taking Cuba,” Donald Trump said on March 16th. “Whether I free it, take it, I think I can do anything I want with it.” Marco Rubio, his Cuban-American secretary of state, is more dip- lomatic but just as opaque. “Cuba’s status quo is unaccept- able,” he said on February 25th, after meeting regime officials in St Kitts & Nevis. “Cuba needs to change…and it doesn’t have to change all at once.” Who knows what this means? What is clear is that the regime has been forced to negoti- ate. On March 13th Miguel Díaz-Canel, Cuba’s president, ad- mitted publicly to speaking to the Americans. A deal appears to be taking shape, modelled on the one the Trump adminis- tration has cut with the regime in Venezuela. The Americans have, in fact, been allowing fuel to be shipped to Cuba since the middle of February, but only via the private sector. Under the deal this arrangement would be expanded. The country would open up to American investment, particularly in energy. Political prisoners would be released, and exiles would be per- mitted to return, not just as tourists but as business owners. Crucially, the Castro family and most of the ruling figures clustered around it seem likely to hold on to power. The Cubans in St Kitts included Fidel’s nephew and great-nephew. Mr Díaz-Canel holds little real clout, but he may well end up being ousted to satisfy Mr Trump and protect the Castros. It is remarkable that a communist regime has managed to survive for 67 years with the world’s most powerful nation, just a hundred miles away, bent on its destruction. To do so, the re- gime has regularly reneged on agreements like the one Mr Trump is considering. Many of those who care about Cuba, particularly Cuban-Americans in the United States, argue against any deal that does not involve the departure of the A deal with the Cuban regime would be dirty, but better than the alternatives Dealing with Havana Cuba’s future C002 -- 8 of 78 -- 10 The Economist March 21st 2026 Leaders ▸ Castro network from the island and the end of the regime. But after six decades of single-party rule, the regime is too entrenched to be removed at a stroke. Instead, Messrs Trump and Rubio are in a position to negotiate an opening-up that may, eventually, lead to the regime’s demise. The Americans should enforce compliance to a far greater extent than they have in the past. If the regime starts using shadow-fleet tank- ers to import fuel, bypassing the private sector, America could seize them. If the release of political prisoners stalls, the sup- ply of oil could be stalled too. Sanctions would remain in place, with licences being used to allow investment. If the private sector can be helped to grow faster than the state-controlled economy, the regime’s latitude for control will shrink. Over time, America should then demand political liberalisation, too. Cutting a deal may let the regime cling on. But the alterna- tives are worse. If Mr Trump ends his blockade with nothing to show for it, the regime may be empowered. Continuing to squeeze in the hope of igniting protests that topple the strong- men is unlikely to work. Cubans pay a high price for challeng- ing their government; in the past many have preferred simply to leave the country. A prolonged blockade risks creating a hu- manitarian crisis on America’s doorstep. That would be bad for Cubans and bad for the United States, and would risk pushing Cuba further into the arms of China and Russia. Mr Trump wrongly thinks he can run the western hemi- sphere through aggression alone. But when it comes to Cuba, he has an opportunity to do what he thinks he does best: make a deal. Then he should stick to it. ■ THE WORLD is facing its second gas shock in half a decade. After Russia cut flows to Europe in 2022, intending to un- dermine support for Ukraine, the continent turned to liquefied natural gas (LNG) shipped from America and the Middle East, sending prices soaring. Now LNG supplies from the Gulf have been cut off, too. Power prices have consequently surged. Some experts argue that renewables offer a promising way to get off gas, and thereby ensure energy security (see Europe section). They point to Spain, which has pursued huge invest- ments in wind and solar; so far this year gas has set power pric- es there only 15% of the time, compared with 89% for Italy. So- lar’s share of power generation in Pakistan increased from 0.7% in 2019 to 10% in 2024; the country’s import bill for LNG for the rest of this year is likely to be $6bn less than it otherwise would have been, according to one analysis. Unfortunately, the world will remain haunted by the spectre of natural-gas shocks for decades to come. Even in a world domin- ated by clean energy, natural gas will continue to be a critical part of electricity generation. Solar and wind power, along with batteries, cannot offer complete energy security. Gov- ernments can, however, limit the damage that gas shortages can do. Analysts contend that it is possible to run a cost-effective electricity grid where the vast majority of power comes from renewables in concert with batteries. But a grid that is split be- tween 90% clean energy and 10% fossil fuels does not mean one in which those two sources consistently provide that mix of energy. Instead it is one in which for a tenth of the time, nearly all of the power is derived from fossil fuels. That is because renewables are at the mercy of Mother Nature. The sun does not always shine, nor does the wind al- ways blow. Batteries are increasingly able to smooth out short- term fluctuations in supply and demand—a cloud passing over a solar array, for example, or the evening peak after the sun goes down—but they cannot keep the lights on for longer peri- ods. Other options are not appealing. Not all countries have the appropriate geography for hydropower, and in any case water is at the mercy of the weather, too; Europe’s crisis in 2022 was worsened by a drought. New nuclear power stations remain prohibitively expensive. Alternative forms of long-du- ration storage, such as iron-air batteries or hydrogen, are in their infancy. For the moment, analysts’ net-zero projections include a role for natural gas far into the future. Importers of gas will therefore remain vulnerable to supply disruptions. Governments will have to ensure there is capacity to satisfy all demand, which includes import capacity for LNG, storage facilities and pipelines, as well as power plants. If glo- bal gas demand falls, supply may become dominated by a few low-cost producers. The market could become thinner, subject to moments of acute shortage. Beyond seasonal storage, tax- payers may need to stump up for strategic reserves. Though gas cannot be entirely avoided, there are things governments can do to rely on it less. Grids should become bigger and smarter. That means time-varying prices, which encourage consumers to shift demand to hours when power comes from virtually free sources of en- ergy such as the sun and wind. If prices rise when clean energy is scarce, that will incentiv- ise investment in promising forms of energy storage. Interconnections between grids can reduce exposure to local weather. Local pricing can also help. At present there is often little incentive for storage and energy-intensive industries to be sit- uated in windier or sunnier parts of a country. As a conse- quence, grids become congested when it is sunniest or windi- est. Allowing prices to reflect local conditions should help alle- viate these bottlenecks, meaning that turbines would not need to be turned off when it is windy. It helps, too, that the costs of relying on natural gas as a backup are far lower than depending on it for everyday energy needs. Britain’s Climate Change Committee, an advisory body, reckons that the additional investment cost of moving from gas to renewables would eventually be offset by substantial fuel savings. There is no getting off gas for a while. But its pow- er to shock can be reduced. ■ Gas will not be killed off by renewables any time soon. But there are ways to rely on it less Lingering fumes Natural gas Asia, liquefied natural gas price $ per million BTUs 20 15 10 March February 2026 C002 -- 9 of 78 -- 11 The Economist March 21st 2026 → Letters should be addressed to the Editor at: The Economist, The Adelphi Building, 1-11 John Adam Street, London WC2N; Email: letters@economist.com. More letters available at: economist.com/letters The cost of putting AI in orbit I enjoyed your piece on why data centres in space are less crazy than we might think (“Orbital number-crunching”, March 7th). However, you underestimated the cost and supply constraints of space- grade solar generators. Satel- lite-design costs could fall to “less than $5 per watt”, you say. In reality, the baseline price for a space-grade photovoltaic triple-junction cell is closer to $1,000 per watt, and supply is highly constrained. It is true that massive, spec- ulative demand could eventu- ally drive economies of scale for cheaper silicon-based cells ($20 to $100 per watt). But these cells operate at only two-thirds the efficiency of triple-junction cells, suffer from uncertain long-term radiation degradation, and lack the manufacturing base for high-quantity procurement. Also, your assumptions regarding thermal manage- ment require careful scrutiny. The International Space Sta- tion already utilises extremely efficient, state-of-the-art radia- tor systems. Although it is true that an unmanned data-centre satellite could improve specific power by stripping away the heavy fail-safes required for human life support and for equipment to operate at high temperatures, bridging the remaining gap to a tenfold increase in heat dissipation per kilogram remains speculative. Finally, the competitive model relies on launch costs falling dramatically to $500 per kg. Next-generation heavy-lift vehicles may eventually alter the economics, but SpaceX currently holds a quasi-monop- oly in the market. In real terms, the actual costs for rideshare and dedicated Falcon 9 launch- es have remained flat for the past six years. All these realities suggest a realistic timeline is closer to 15 years, rather than the two to three years being touted. TOBIAS FREUDENBERG Munich What Europe must do on AI You are right that the mindset in Europe is changing with regard to AI (“Breeding Euni- corns”, March 7th). For Euro- pean tech to stand a real chance, three things need to happen. First, AI startups must form partnerships with strong traditional industries, the backbone of many European economies. If they leverage industrial data meaningfully, that’s when the party starts. Second, governments across the EU need to bundle their activities instead of creating small AI clusters here and there. Third, law enforcers must ensure open and compet- itive markets. Governments are still blindly relying on big tech, thereby perpetuating depen- dencies and lock-ins. Free competition drives innovation, not the puny hope of being integrated into the ecosystem of a big tech player. RUPPRECHT PODSZUN Co-chair German government commis- sion on competition and AI Düsseldorf How to tax the rich Your article correctly argues that higher income taxes are a poor instrument for extracting revenue from the ultra-wealthy, whose fortunes derive largely from appreciating assets rather than wages (“The Robin Hood state”, February 21st). We should indeed be sceptical about New York City’s pro- posed levy and California’s wealth tax. Yet after acknowledging the “outrageous” loophole that allows the ultra-rich to avoid capital gains if assets are held until death, even as they bor- row against the assets to fund spending, you dismiss reform because fixing this would raise only around 0.1% of GDP a year. This conflates two separate questions: whether such re- form would solve budget pres- sures, and whether the current arrangement is defensible. A tax system that permits the wealthiest Americans to accumulate and transmit dy- nastic wealth largely untaxed sits uneasily with your claim that redistribution has kept pace with inequality. Moreover, by pointing to increased in- come taxes on the rich as evi- dence for this redistribution you make the same error that New York and California have made—that taxing the incomes of the rich is relevant to the wealth gap. The problem is not that politicians want to tax the rich but that they are reaching for the wrong tools. Closing gaps to address the structural asym- metries of the taxation of capital versus labour would strengthen the coherence, perceived legitimacy and fair- ness of our tax system. PHILIP DORITY West Palm Beach, Florida Coincidence? Bagehot (February 28th) iden- tified the paranoid style in British politics. The concept was introduced by Richard Hofstadter’s lecture, “The Paranoid Style in American Politics” at Oxford University on November 21st 1963, the day before President Kennedy’s assassination in Dallas. ALEX WADE Loughborough, Leicestershire Ebbs and flows The profile of China’s tech elite mentioned that Xi Jinping describes them as nongchaoer, those who “ride the tide” of great economic changes (“Among the lucky few”, Febru- ary 28th). That revives a 1,000- year-old term that seems charmingly outdated today. Although it was a fitting label for those “plunging into the sea” (xia hai) in the 1980s, the new generation would much rather be dubbed China’s Elon Musks than “tide-players”. Innovation today is less about riding the waves and more about redefining the current. JIN LIYUN Shenzhen, China Letters data centres in space, AI in Europe, taxing the rich, supermarket shopping, paranoia, China’s tech elite Shop till you don’t drop You wrote about how AI tools are being prepared for the physical world (“I can show you the world”, February 28th). The article treats gro- cery shopping as an optimi- sation problem awaiting automation. Retailers may tremble at the thought. Su- permarkets are not just ware- houses. They are carefully choreographed arenas of temptation. The smell of baking bread, the strategi- cally placed confectionery and the serpentine layout are designed to maximise profits. Business schools teach sens- ory marketing, shelf place- ment and psychological merchandising precisely because humans are glori- ously irrational. A perfectly rational humanoid dis- patched with a shopping list would stride past promotion- al displays, ignore aisle se- ductions and return with exactly what was requested. Basket sizes would shrink, along with margins. “World models” may help robots navigate aisles. Whether they can keep those aisles profit- able is another matter. NIMIT SURI Pune, India C002 -- 10 of 78 -- 12 PROPERTY C002 -- 11 of 78 -- 13 PROPERTY C002 -- 12 of 78 -- 14 The Economist March 21st 2026 Badr Albusaidi TWICE IN NINE months the United States and Iran have been on the verge of a real deal on the most difficult issue that di- vides them: Iran’s nuclear-energy programme and American fears that it could be a weapons programme. So it was a shock but not a surprise when on February 28th—just a few hours after the latest and most substantive talks—Israel and America again launched an unlawful military strike against the peace that had briefly ap- peared really possible. Iran’s retaliation against what it claims are American targets on the territory of its neighbours was an inevitable, if deeply regret- table and completely unacceptable, result. Faced with what both Israel and America described as a war designed to terminate the Islamic Republic, this was probably the only rational option avail- able to the Iranian leadership. The effects of this retaliation are felt most acutely on the southern side of the Gulf, where Arab countries that had placed their trust in American security co-operation now experience that co-operation as an acute vulnerability, threatening their present security and future prosperity. For Gulf states an economic model in which global sport, tou- rism, aviation and technology were to play an important role is now endangered. Plans to become a global hub for data centres may need to be revised. The effects of Iran’s retaliation are already being felt globally, as maritime traffic through the Strait of Hor- muz is severely disrupted, driving up energy prices and threaten- ing deep recession. If this had not been anticipated by the archi- tects of this war, that was surely a grave miscalculation. The American administration’s greatest miscalculation, of course, was allowing itself to be drawn into this war in the first place. This is not America’s war, and there is no likely scenario in which both Israel and America will get what they want from it. Hopefully America’s commitment to regime change is just rhetor- ical, whereas Israel explicitly seeks the overthrow of the Islamic Republic and probably cares little about how the country is gov- erned, or by whom, once this has been achieved. With this objective in mind Israel’s leadership seems to have persuaded America that Iran had been so weakened by sanctions, internal divisions and the American-Israeli bombings of its nuc- lear sites last June, that an unconditional surrender would swiftly follow the initial assault and the assassination of the supreme leader. But it should now be clear that for Israel to achieve its stat- ed objective will require a long military campaign to which Amer- ica would have to commit troops on the ground, opening a new front in the forever wars which President Donald Trump previous- ly vowed to end. This is not what America’s government wants. Nor do its people, who certainly do not see this as their war. The question for friends of America is simple. What can we do to extricate the superpower from this unwanted entanglement? First of all, America’s friends have a responsibility to tell the truth. That begins with the fact that there are two parties to this war who have nothing to gain from it, and that the national interests of both Iran and America lie in the earliest possible end to hostilities. This is an uncomfortable truth to tell, because it involves indicat- ing the extent to which America has lost control of its own foreign policy. But it must be told. The leadership of the United States will then need to decide where its national interests really lie, and act accordingly. A sober assessment of those interests would indicate that they must in- clude a definitive and decisive end to nuclear-weapons prolifera- tion in the region, secure energy supply chains and renewed in- vestment opportunities in the context of the region’s growing glo- bal economic significance. All of these would be best achieved with Iran at peace with its neighbours. They can perhaps be iden- tified as shared objectives for all the countries of the Gulf. How to get there from today’s catastrophe is the challenge. It may be difficult for America to return to the bilateral negoti- ations from which it was twice diverted by the temptations of war. It will certainly be difficult for the Iranian leadership to return to dialogue with an administration that twice switched abruptly from talks to bombing and assassination. But the path away from war, hard though it may be for both parties to follow it, may have to lie through precisely this resumption. Envisaging positive energy The parties need an incentive to summon the necessary courage to engage once again. This could be provided by linking the bilat- eral negotiations essential to resolving the core American-Iranian issue to a wider regional process, designed to achieve a framework for transparency on nuclear energy—and the energy transition more broadly—in the region. As all the countries of the region look towards their shared post-carbon future, secure innovation and development may depend upon some basic agreement on the role nuclear technologies will play. Could this offer a prize large enough for all the main players to willingly endure the difficulties of dialogue to win it together? It is certainly something Oman and its Gulf Co-operation Council neighbours can propose. Some initial talks could lead over time to confidence-building measures and a consensus around the role nuclear energy should play in the energy transition. The ultimate destination of such a process is, of course, impossible to deter- mine, especially in the middle of a war. But might it be possible, perhaps in the context of a regional non-aggression treaty, to se- cure a substantive regional deal on nuclear transparency? ■ Badr Albusaidi is the foreign minister of Oman. He mediated the most recent nuclear talks between America and Iran. BY INVITATION America’s friends must help extricate it from an unlawful war C002 -- 13 of 78 -- 15 The Economist March 21st 2026 Briefing America’s war on Iran Double deadlock THE CONFLICT ravaging the Middle East may best be understood as two parallel wars. One is the campaign of American and Israeli air strikes against the Iranian regime; the other is Iran’s war on the global economy. Both are largely one- sided. Iran cannot repel the warplanes prowling its skies and America has no easy way to reopen the Strait of Hormuz, the narrow waterway vital to the flow of oil, gas and other commodities, or to stop Iranian attacks on energy-production facilities. For Iran, that asymmetry is the point: the energy war is meant to induce America to halt its air war and deter it from some day launching another one. Yet it may do the opposite. Donald Trump seems unlike- ly to end the fighting while the strait is blocked. Crucially, his allies in the Gulf agree: having borne the brunt of Iran’s re- taliation, most now want to see the regime incapacitated. America, Israel and the Gulf states started the war with different aims— yet as the fighting enters its fourth week, Iran is pushing them into alignment. The Pentagon says it has carried out more than 7,000 strikes across Iran thus far. Israel has conducted thousands of its own, including a series of raids targeting senior Iranian officials. On March 17th it assassinated Ali Larijani, a wily politician who was among the most powerful men in Iran (see later article), and the head of the Basij, the regime’s paramilitary enforcers. The next day it announced it had killed the intelligence minister. Beyond such headline-grabbing at- tacks, America and Israel have also bat- tered Iran’s armed forces, from the depots that house missiles and drones to the fac- tories that produce them. More than 100 ships have been sunk. The death toll is mounting, with more than 3,000 Iranians killed, including at least 1,300 civilians, ac- cording to HRANA, a human-rights group. For some American officials, winning the air war is enough: they have tried to nudge Mr Trump to declare victory. But the president seems increasingly focused on the other war. The prices of oil and natural gas, already high, leapt yet more as strikes on energy facilities intensified, and the cost of everything from fertiliser to helium, a vital input in semiconductor manufactur- ing, has soared too (see Finance section). Strait shooting The Strait of Hormuz is not literally closed: Iran’s surface fleet was never that formidable to begin with, and much of it is now at the bottom of the sea. Instead the regime has imposed a de facto blockade through a mix of threats and sporadic mis- sile and drone attacks on commercial ves- sels. Shipping firms, understandably, have little tolerance for that sort of risk. RIYADH There is plenty of scope for the fighting to intensify, but no obvious way to end it ⏩ → ALSO IN THIS SECTION 16 America’s overstretched forces 18 Who is running Iran? C002 -- 14 of 78 -- Briefing America’s war on Iran 16 The Economist March 21st 2026 ▸ ⏩ America will struggle to reassure them. The Pentagon has mulled naval escorts but is not ready to provide them. Mr Trump spent several days this week alternately begging and badgering allies in Europe and Asia to join a maritime coalition. Then, on March 17th, he said this was no longer needed: “In fact,” he wrote, “WE DO NOT NEED THE HELP OF ANYONE!” In truth, it would be hard for any navy to secure the strait. Its geography is forbid- ding. It is just 54km (34 miles) wide at its narrowest point and flanked by mountains on both sides. Even beyond this choke- point, the seas either side are within easy range of Iranian drones and missiles. Es- cort ships would have mere seconds to re- act to an attack. Sending troops to secure the coastline is a non-starter, given the size of the force required; Iran could also just continue shooting from inland. Instead Mr Trump may shift his atten- tion elsewhere. For decades he has been fixated on Kharg island, a rocky speck where 90% of Iran’s oil exports are loaded onto tankers. He told an interviewer in 1988 that, were he president, he would “do a number” on it. On March 13th he got his chance: America bombed dozens of mili- tary targets there, hitting storage depots for missiles and naval mines. Kharg the herald The oil terminal was left untouched, for what Mr Trump calls “reasons of decency”. That may be because he aims to seize it. A marine expeditionary unit, which trains for this sort of mission, is being redeployed from Japan to the Middle East (see next story). America could no doubt capture the island. The idea would be to use it as lever- age: if Gulf states cannot export their oil, neither can Iran. If the regime proves stub- born, however, American marines would have to withstand a potential barrage of missiles and drones. Oil prices would no doubt jump further, both from the loss of supply (Iran ships around 1m b/d to China) and the prospect of a longer war. Meanwhile, Iran is pursuing its own sort of escalation. A share of Gulf oil is still flowing through two pipelines that bypass the Strait of Hormuz. One of them, in Sau- di Arabia, can transport up to 7m b/d, two- thirds of the kingdom’s total output, to ports on the Red Sea (see map). The other, in the United Arab Emirates (UAE), can move about half of that country’s 3.4m b/d to the port of Fujairah. Dozens of tankers are already sailing towards Saudi Arabia’s west coast to pick up crude. On recent nights Iran has launched dozens of drones at Saudi oil fields, up from just a handful at the start of the war. In the UAE it has attacked Fujairah (the source of the plume of smoke in the image on the previous page), a big gas field and the Ruwais refinery, which can process nearly 1m b/d. After Israel bombed Iran’s portion of the world’s biggest gas field on March 18th, Iran targeted the processing plant on the Qatari side of the same field. All of this suggests a change in tactics, in which Iran tries to hit the sources of ener- gy supply, not just the vessels bringing it out of the Gulf. With so many tankers bound for the Red Sea, Iran might also encourage the Houthis, its militia ally in Yemen, to re- sume their own campaign against ship- ping. The group largely halted traffic through the Red Sea in 2024 by firing mis- siles at ships, which it described as a show of support for Palestinians in Gaza. Even a single such attack now would probably be enough to send markets into a panic. Ye- men-watchers are split on whether the group would agree, though; some think it would prefer to stay out of the war to avoid antagonising the Saudis. The loss of oil-and-gas exports is not the only economic blow to the Gulf. This should be one of the busiest times of the year in the region, with a final spurt of business-and-tourism activity between the end of Ramadan on March 19th and the start of scorching summer heat. Instead, conferences are being postponed until au- tumn and hotel workers are being fur- loughed for want of guests. Thousands of expats have left, while many planes to the Gulf arrive almost empty. The magnitude of Iran’s attacks on Gulf states has decreased, from around 1,000 missiles and drones on the first day of the war to about a tenth of that today. Even oc- casional attacks are disruptive, though. Emirates, the state-owned airline of Dubai, has been gradually resuming flights. On March 15th it had hoped to operate around 60% of its pre-war schedule. Then debris from an intercepted Iranian drone hit a fuel depot at Dubai’s main airport. Quiet diplomatic contacts with Iran have been infuriating: the regime some- times denies that it is attacking civilian tar- gets at all. “They’re gaslighting us,” says a diplomat briefed on a recent call. Iranian officials are also airing maximalist de- mands, such as the closure of all American military bases in the region. They also sug- gest they expect plentiful investment from the Gulf states to repair the damage from the war, a request Gulf officials liken to a mob boss running a protection racket. The Gulf states have not joined the fight themselves, although on March 17th Anwar Gargash, the diplomatic adviser to the UAE’s president, said his country might be willing to take part in a naval coalition to secure the strait. In any event, their ca- pabilities would be limited. More impor- tant is what they have not done: urge America to stop. The message to Mr Trump from most Gulf leaders has been that the war cannot end with an embold- ened Iranian regime able to hold their economies hostage. Many Israeli officials want to fight on as well, seeing this as a rare opportunity to wound their main state adversary. Mr Trump’s aims are still unclear: does he want to topple the regime, make a deal with it or merely hobble it? Officials in the Gulf struggle to parse his ever-changing pronouncements. Yet by making this a war over energy, Iran may have made such questions moot. It is pushing all of its foes toward the same conclusion: that the war cannot end until the regime is crippled. ■ IRAQ LEB. EB. EB. EB. EB. SYRIA JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN JORDAN IRAN IRAN IRAN IRAN IRAN SAUDI ARABIA YEMEN ISRAEL ISRAEL ISRAEL ISRAEL QATAR QATAR QATAR QATAR QATAR OMAN BAHRAIN KUWAIT UAE Strait of Hormuz Kharg Kharg Kharg Kharg Kharg Island sland sland sland sland sland S. Pars S. Pars S. Pars S. Pars field Fujairah Dubai Dubai Dubai Dubai Dubai Dubai Dubai Dubai Ruwais refinery Arabian Sea Red Sea The Gulf Tehran Tehran Tehran Tehran Tehran Tehran Tehran Tehran Tehran Riyadh Pipeline Houthi-controlled Houthi-controlled 250 km America’s armed forces Fire-retardant spray “WE LIVE IN a world of scarcity,” de- clared J.D. Vance, then a senator, at the Munich Security Conference in 2024. “We don’t make enough munitions to sup- port a war in eastern Europe, a war in the Middle East and potentially a contingency in East Asia.” Mr Vance, who is now vice- president, was correct. The war that his boss, Donald Trump, has launched in Iran will pile pressure on America’s over- stretched armed forces, leaving them less prepared for a conflict in Asia. The impact of Operation Epic Fury could last for years. America probably used just over 5,000 munitions of different sorts in the first four days of the war, and 11,000 or so in the first 16 days, according to analysis by Jahara Matisek, Morgan Bazilian and Macdonald Amoah of the Payne Institute of Public Policy in Colorado. That would make Epic Fury “the most intensive opening air cam- paign in modern history”, they note, eclips- ing the first three days of NATO’s bombing of Libya in 2011. WASHINGTON, DC The Iran war could sap American military power for years C002 -- 15 of 78 -- Briefing America’s war on Iran 17 The Economist March 21st 2026 ▸ Once American and Israeli aircraft gained control of Iran’s skies, by destroy- ing the country’s air defences, they could fly close to their targets and use short- range bombs, which are cheap and plenti- ful. America is thought to have hundreds of thousands of JDAMs, a guidance kit that can be strapped to ordinary bombs. “We have a nearly unlimited stockpile,” Pete Hegseth, the secretary of war, recently boasted. Two weeks into the conflict, the Pentagon estimated that 99% of the muni- tions it was using in Iran were of this sort. The problem lies mainly in what was consumed before then. In the first six days of the war, when American planes needed to keep their distance, CSIS, a think-tank in Washington, estimates that over 1,000 scarce and expensive “stand-off” muni- tions were fired. Hundreds more medium- range missiles, as well as anti-radiation missiles, which home in on air-defence ra- dars, are also thought to have been used. Stocks of all these are far less plentiful, al- though the precise numbers are secret. An even bigger problem relates to air defence. Iran’s initial salvoes of ballistic missiles and drones have burned through a significant chunk of American and allied interceptors. In the first week of the war, America is estimated to have fired around 140 Patriot PAC-3 MSE interceptors and more than 150 THAAD interceptors. Stocks were already low. America had reportedly fired a quarter of its THAAD inventory last year while defending Israel against Iranian strikes. “We have enough Patriots to keep going,” notes Mark Cancian of CSIS. “But every one we fire is one fewer that we could have for Ukraine or the Western Pacific.” Replenishing all this will take years. The cost of replacing the first four days’ worth of munitions would be $20bn-26bn, estimate Messrs Matisek, Bazilian and Amoah. The problem, however, is more to do with scarcity than cost. America is thought to have used more than 300 Toma- hawk cruise missiles in the opening days of the war, but the Pentagon had planned to buy just 57 new ones in the current fiscal year. There have been no deliveries of THAAD interceptors since 2023 and the Pentagon has not placed any new orders this year. A puny 39 interceptors are slated for delivery in 2027—six years after they were ordered. The Pentagon has grand plans to speed up procurement with big, multi-year con- tracts. It wants to raise production of Tomahawks from 60 to 1,000 a year, and PAC-3 MSEs from 600 to 2,000, for example. But Congress has not agreed to pay for this. And the supply chain for munitions is opaque and gummed up. The motors mis- siles use are a good example. Some materi- als, such as propellant, are available from only one or two firms, often after a long wait. Other components involve critical minerals controlled by China. “Congress can appropriate $26bn overnight,” note Messrs Matisek, Bazilian and Amoah. “It cannot appropriate gallium, neodymium or ammonium perchlorate into existence.” Only a handful of drones, refuelling tankers and fighter jets have been lost in the war; wear and tear is the more serious concern. This is most acute in the US Navy. America has 11 big aircraft-carriers but only a handful are available at any one time. Two—the USS Abraham Lincoln and USS Gerald R. Ford—are now involved in Epic Fury, with the USS George H.W. Bush thought to be en route. The Ford has been at sea for almost 270 days. In mid-April it will break the record for the longest carrier deployment since the Vietnam war. In two months, if still deployed, it will also break the record set by the USS Midway in 1973. Fighting decay The strain is evident. The Ford suffered a 30-hour fire this month, leaving more than 600 sailors without beds, the New York Times reports. Such mammoth deploy- ments will be felt long after the war ends. “It’s like driving a car at 200 miles per hour for months, without an oil change,” says Joe Costa, a former Pentagon official now at the Atlantic Council. That compounds a “massive backlog” in maintenance. The current pace of operations is likely to produce occasional “carrier gaps”— when America cannot deploy a carrier in some parts of the world—for two or three years, says Stacie Pettyjohn of CNAS. Per- sonnel are also exhausted. Long deploy- ments contribute to family stress, which is a risk factor for suicides, notes Mr Costa. This does not mean the war is all bad for America’s armed forces. Mike Horo- witz, a former Pentagon official, points to three bright spots. One is the debut of new, cheaper weapons such as the Low-cost Uncrewed Combat Attack System (LU- CAS), a drone modelled on Iran’s own Sha- heds that could be mass-produced far more quickly than Tomahawks. The sec- ond is the combat experience gleaned by American forces—“a huge differentiator between the United States and China”. The third is America’s use of modern AI- enabled decision-support systems, for tasks such as targeting and command-and- control, for the first time on a large scale. But Mr Horowitz is not sure that these benefits outweigh the longer-term costs. Indeed, the very process of testing new weapons and gaining experience under fire also carries a risk. “We are revealing our tactics to China,” says Mr Costa, pointing to the question of how America might reopen the Strait of Hormuz. “The Chinese will learn about how we de-mine,” he says. “If the Chinese have a sense of our tactics and the time it takes, they will use that in- formation if they decide to invade Taiwan.” Mr Vance and others in Mr Trump’s or- bit came to office arguing that America had wasted blood and treasure in the post-2001 wars in the Middle East, that the armed forces were woefully over-extended and that America ought to husband its re- sources in preparation for any future con- flict with China. Instead the war in Iran is cannibalising forces in Asia—a marine ex- peditionary unit has been diverted from Ja- pan and parts of a THAAD system from South Korea—while eroding the readiness of units that might be needed there in the years to come. “There is no sugar-coating this situation,” argues Tom Karako, also of CSIS. “The scale of recent munition expen- ditures and the degradation of US missile- defence capability may well undercut de- terrence in the Pacific for the remainder of this decade.” ■ A scarce resource C002 -- 16 of 78 -- Briefing America’s war on Iran 18 The Economist March 21st 2026 Iran’s government Who is in charge? THE RANKS of Iran’s leadership are thin- ning. On the first night of America’s and Israel’s air strikes, several generals, the defence minister and the supreme leader, Ayatollah Ali Khamenei, were all killed. This week Ali Larijani, the man who ap- peared to be running the country after that initial blitz, died in similar circumstances. So, too, did the two generals heading the Basij, a paramilitary force used to suppress internal dissent, and the intelligence min- ister. Given the disappearance of Mojtaba Khamenei, Iran’s new supreme leader (and the son of the previous one), who has not been seen in public since his appointment and is rumoured to have been badly in- jured, it is no longer clear who is calling the shots or naming successors to fill all the gaps in the leadership. The relentless as- sassinations are likely to make the regime more brittle—but they may also make it harder to bring America’s and Israel’s war on Iran to any sort of negotiated end. Israel depicts the killings of senior Ira- nian officials as paving the way for the Is- lamic Republic’s overthrow or collapse. “We are undermining this regime in the hope of giving the Iranian people an op- portunity to remove it,” Binyamin Netan- yahu, Israel’s prime minister, said after Mr Larijani’s death was announced. Over two weeks into the war, Israel still seems to have excellent intelligence on the where- abouts of Iranian officials. It is also bomb- ing bases of the Islamic Revolutionary Guard Corps (IRGC), the regime’s most elite fighting force. It has even hit street checkpoints manned by the Basij. The assassinations appear to be de- signed “to progressively disintegrate the state”, as a former British intelligence offi- cer puts it. However, Israeli intelligence as- sessments suggest the regime cannot be brought down by air strikes alone, but only in conjunction with internal dissent. They also contend that protesters will not take to the streets, as they did in huge numbers two months ago, while bombs are still fall- ing. Much will hinge on who, if anyone, is in charge whenever the bombing abates. Mr Larijani was unusual in that he straddled the three main pillars of the re- gime: the IRGC, Islamic clerics and the bu- reaucracy. He was the son, brother and son-in-law of senior ayatollahs and trained in a seminary. He fought with the IRGC during the Iran-Iraq war. He also served as culture minister and speaker of parliament. He was hard to pin down ideologically. As head of state broadcasting he hounded reformists. Yet he also aligned himself with Ali Akbar Rafsanjani, the pragmatic for- mer president who led post-war recon- struction in the 1990s and pursued detente with the West. As a philosophy professor he taught the Enlightenment, specialising in the work of Immanuel Kant. Moreover, Mr Larijani knew the levers of power. Abroad, he acted as an envoy for the supreme leader to China, the Gulf states and Russia. When Oman sought to broker a last-minute deal on the eve of war, it was Mr Larijani, for example, who set Iran’s negotiating parameters. Some saw him as the potential leader of a more prag- matic “second Islamic Republic” or even Iran’s counterpart to Delcy Rodríguez, Venezuela’s vice-president, whom Mr Trump elevated to head of state. “They’ve removed the one person most likely to reach an accommodation,” says a veteran opposition figure. There is a chance that another pragma- tist might emerge from the internal jockey- ing now under way. Figures such as Mo- hammad Baqer Qalibaf, a former IRGC commander and parliamentary speaker, or Hassan Rouhani, a former president and architect of Iran’s nuclear deal with Amer- ica in 2015, could help make the regime more conciliatory. Neither is on America’s list of officials to be hunted down. Ideologues on alert But hardliners may spy an opportunity. They had previously vetoed Mr Larijani’s candidacy for president. They are thought to want to appoint Saeed Jalili, a more ideological figure, to replace him at the head of the National Security Council. That would signal an Iran less likely to agree to any deal to end the war and more likely to pursue nuclear weapons. “They will substitute Larijani with a madman who prefers martyrdom and will go to the end,” says an Iranian journalist recently ar- rived in Britain. The regime’s tone, at least, is hardening: on March 18th Abbas Aragh- chi, the foreign minister, not only demand- ed an end to the bombing of Iran, but also for America and Israel to cease all attacks in Iraq, Lebanon, Palestine and Yemen. Opponents of the regime may see an opening, too. Growing numbers of the se- curity services are said to be reluctant to show up for work, for obvious reasons. Meanwhile, unrest simmers. Iranians have not rallied round the flag in the numbers they did after America’s and Israel’s previ- ous bombing campaign, in June. Yet Iranians largely ignored the call of Reza Pahlavi, son of Iran’s last monarch, who was overthrown by the Islamic revolu- tion, to protest to mark Chaharshanbe Su- ri, an ancient Persian festival, on March 17th. The regime still appears to function. If it falls apart, the result may be chaos and bloodshed. A former member of the IRGC says that, should the chain of com- mand rupture, the security forces have a plan to disperse into 30,000 five-man units. The longer the conflict drags on, the more brittle Iran’s political order becomes—and the greater the risk that the state fractures into competing centres of power, with un- predictable consequences. ■ JERUSALEM The assassination of senior officials weakens Iran, but also makes it less predictable Iran’s leader on paper C002 -- 17 of 78 -- 19 The Economist March 21st 2026 United States Iran and the midterms “I’m really not afraid of anything” REPUBLICANS SHOULD not panic, in- sists the White House. “NO PANI- CANS!”, it tweeted on March 14th. None- theless, signs of panic can be detected. Although President Donald Trump says he has “destroyed 100% of Iran’s Mil- itary Capability”, the 0% that remains is playing havoc with the global economy by choking off 10-15% of its oil supply. Mr Trump’s war of choice is more unpopular with American voters than any recent con- flict, and the odds of a thumping for Re- publicans at the midterms in November just grew shorter. “It’s a wild mess,” says Curt Mills of the American Conservative. Vexed by negative coverage, Mr Trump is describing critical media outlets as “Cor- rupt and Highly Unpatriotic”. On March 15th he said he was “thrilled” to hear that his Federal Communications Commission might review the broadcast licences of those that peddle “FAKE NEWS”. Yet one source of gloomy news cannot plausibly be muzzled: the signs outside petrol stations. Every day motorists see big, bright reminders that fuel costs more than it did. And the pain is worse in states that backed Mr Trump in 2024. Because petrol taxes tend to be lower under Repub- licans, an increase in the oil price leads to a steeper hike in prices at the pump in red states than in blue ones. History suggests that when fuel prices rise, voters are more likely to vote against the incumbent president. Gerald Ford, Jim- my Carter and George H.W. Bush all lost office after oil-price spikes. Mr Trump won office vowing to avoid wars and bring prices down “on day one”. Breaking both promises is costing him support. Approval of the war is negligible among Democrats, low among indepen- dents and high among Republicans—but the number of Republicans who strongly approve has fallen quickly (see chart 1). Young people and Latinos, two groups that swung hard in Mr Trump’s favour in 2024, spend a higher share of their income on petrol than other Americans (see chart 2). At Skip’s Lounge, a billiards bar in Bux- ton, Maine, three things are banned: poli- tics, religion and arm-wrestling. But pa- trons are griping about the war. “There’s no reason to be doing any of this,” says Bill Mitchell. Higher diesel prices are squeez- ing his rural building-supply firm. His wife Jane, who runs a horse-boarding farm, fears that the price of fertiliser, which is derived from natural gas, will rise, too. Democrats are likely to win the House, and need to pick up four seats to win the Senate. Maine could be one. The incum- bent, Susan Collins, is a moderate Repub- lican whose campaign barely mentions the president. But she could be swept away by an anti-Trump wave. Democrats are fired up, judging by turnout in Democratic primaries across the country. Republicans are downbeat. Josh, a veteran browsing camouflage jack- ets in a military-surplus store in Scarbor- ough, Maine, says he voted for Mr Trump in 2024, and doesn’t care if he turns Iran “into a glass parking lot”. But “everyone’s pissed about the gas prices,” he says. All battleground states have seen price rises of 20% or more. In North Carolina, where the Democratic nominee for Senate is a popular ex-governor who has made the cost of living a theme of his campaign, and the Republican is a former oil lobbyist, bet- ting markets give an 80% chance of a Democratic gain. Mr Trump’s efforts to look on the bright side can come across as insensitive. “The United States is the largest Oil Producer in the World, by far, so when oil prices go up, we make a lot of money,” he posted on BUXTON, MAINE AND WASHINGTON, DC Despite all the bluster, Donald Trump’s war is weakening him → ALSO IN THIS SECTION 20 Talking to Tucker Carlson 21 Democrats and the war 22 Farmers in pain 23 Securing the homeland 24 Lexington: Trump and the midterms ⏩ C002 -- 18 of 78 -- 20 The Economist March 21st 2026 United States ▸ ⏩ March 12th. “I don’t think they’re really concerned about what goes on in the everyday lives of regular people,” com- plains Theodore, an Uber driver in Geor- gia, another swing state. The war’s effects on the global econ- omy—and American politics—depend a lot on how long it lasts. Analysts sympa- thetic to the administration offer a bullish assessment. The bombing has been pre- cise, killing Iran’s supreme leader on day one and devastating its navy, missile sys- tems and other military assets. The regime is weakened. When the bombing stops, the Iranian people may overthrow it. Or a lead- er America can do business with may emerge, like Delcy Rodríguez in Venezue- la. “If they do co-operate, they will be spared,” says Victoria Coates of the Heri- tage Foundation, a pro-Trump think-tank. The economic pain may be severe, but the war will be over in weeks, boosters say. Iran may keep shooting at oil tankers even after America stops bombing, but eventu- ally it will stop; it cannot make enemies of the whole world indefinitely. The result will be that “one of the greatest threats to US, regional and global security” will have seen its weapons programmes set back “for years”, says Matthew Kroenig of the Atlantic Council, a former adviser to Mar- co Rubio, the secretary of state. “I don’t see it becoming a quagmire,” he adds. In the short run, the war may benefit Vladimir Putin by raising oil prices, but in the medium term it will enhance American power by demonstrating that the president is prepared to apply force, says Ms Coates. And if oil prices ease before the summer driving season, Republicans’ midterm prospects will not be so grim. Other conservatives are less sanguine. Fresh from snatching Venezuela’s presi- dent, Mr Trump thought doing the same in Iran would be quick and easy, says Kurt Volker, Mr Trump’s former envoy to Uk- raine. “Just like Maduro—three hours, and you’re done.” Mr Trump did “an almost in- comprehensibly terrible job at explaining to the American people what the hell is go- ing on”, says a Republican operative. He failed to prepare for obvious risks—on March 16th he said “nobody expected” Iran to hit its Gulf neighbours. And he has re- placed one Supreme Leader Khamenei with a younger, angrier one whose family America and Israel have just killed; it is not clear this will make Iran less dangerous. Mr Trump is now in “a horrible posi- tion”, says another top Republican. Iran’s drones are cheap to make and costly to shoot down. They threaten slow oil tankers and stationary oil plants. “He has created a problem that is only solved by regime change, and he doesn’t want to [commit ground forces to] do that,” says Mr Volker. The war has illuminated the cost of mistreating allies, too. Having disparaged NATO and threatened to grab part of Den- mark, Mr Trump demanded help from al- lies he did not consult before starting the war. Refusal would “be very bad for the fu- ture of NATO”, he told the Financial Times; yet his pleas went unheeded. His “punitive transactionalism” is “a big part of the rea- son” why “nobody’s willing” to help Amer- ica reopen the Strait of Hormuz, says Kori Schake of the American Enterprise Insti- tute, a conservative think-tank. The war also complicates America’s re- lationship with Israel. “Iran posed no im- minent threat to our nation, and it is clear that we started this war due to pressure from Israel,” said Joe Kent, a senior coun- terterrorism official and ardent America Firster, as he resigned on March 17th. Mr Trump makes his own decisions, but such arguments are common in MAGA world. “My guess would be that they are looking for someone besides their leader to blame for what is not going as successfully as ad- vertised,” says Ms Schake. Mr Trump may yet snatch kudos from the jaws of calamity. If the war is short and oil prices settle down, voters may be less angry come November. If by that time he has brought three rogue regimes to heel— Venezuela, Iran and perhaps Cuba—he will have much to boast about. But Mr Kent fears the current course leads “toward de- cline and chaos”. ■ Vote Trump, suffer at the pump Sources: AAA Fuel Prices; BLS; Catalist; The Economist The Economist The E US, petrol price per regular gallon, % increase Feb 18th-Mar 18th 2026 Hispanic Black White 6 5 4 3 2 9 6 -3 3 12 65+ 65+ 18-29 30- to 44-year-olds 45-64 30-44 18-29 18-29 18-29 30-44 45-64 45-64 Swing to Trump ↑ Swing to Harris ↓ Circle size= Circle size= %% of voters of voters 45-64 65+ 65+ US presidential election 2024, %-point change in vote margin from 2020 Share of spending on petrol, 2021-24 average, % 40 50 30 20 10 0 Florida Texas Texas T States Trump won in 2024 States Harris won North Carolina North Carolina Maine Maine California California Negligible, small and softening United States, % approving of Trump’s handling of the situation in Iran, March 2026 Source: YouGov/The Economist The Economist The E Democrats 16th 9th Somewhat Strongly Independents 80 60 40 20 0 16th 9th Republicans 16th 9th  The anti-war right Conversation with an apostate DONALD TRUMP has plenty of cheer- leaders in America’s right-leaning me- dia. But during his 2024 presidential cam- paign, few were more dogged—or more ef- fective—than Tucker Carlson. He cheered Mr Trump’s nomination at the Republican National Convention, campaigned along- side him and even helped shape his choice of running-mate. On election night, he spent the evening at Mar-a-Lago, chatting with an array of Trumpworld figures be- neath a kitschy oil painting of the once and future president. Those days are long gone. Mr Carlson has become one of the president’s fiercest critics on the right—first over the Epstein files and then, more vehemently, over Iran. Mr Trump says his former acolyte has “lost his way”. But Mr Carlson remains influen- tial with the right, thanks to his nationalist views, combative style and a podcast that draws millions of listeners and viewers with a stream of MAGA-adjacent guests. The Economist travelled to the tony stretch of Florida’s Gulf Coast, where Mr Carlson passes the winter months, to speak with him for “The Insider”, our video show. Looking deeply Floridian, with his gingham shirt, ruddy tan and sockless loaf- ers, he was equal parts charming, pugna- cious and aggrieved. Mr Carlson’s strongest words for the president came when asked whether Mr BOCA GRANDE, FLORIDA Tucker Carlson on whether Donald Trump has betrayed his base C002 -- 19 of 78 -- 21 The Economist March 21st 2026 United States ▸ ⏩ Trump’s war in Iran betrayed the “America First” notion on which he campaigned. He said “the idea behind it is not only contrary to America First, it may be its inverse.” The war was also “something that he promised he wouldn’t do, not once, but countless times”. Why the reversal? The reason, ac- cording to Mr Carlson, is simple: America went to war at the behest of Israel and its influential supporters. He has become a strident critic of America’s relationship with the Jewish state. “You cannot allow a country of 9m to make decisions that are critical to a country of 350m,” he said. “That’s against nature. It’s wrong. And it’s against America’s interest, as this war is.” He also railed against—or, as he might put it, noted the effectiveness of—Israel’s advocates in America. Mr Trump’s “biggest donors pushed for this war, and they would include, literally, an Israeli citizen.” Com- ments such as these, which portrays Israeli influence in the same conspiratorial, pow- er-behind-the-throne terms long used by antisemites, have led some to label Mr Carlson himself an antisemite, a charge he vehemently denies. His views on Israeli strategy are contra- dictory. On the one hand, Israel pushed America into war—though Mr Carlson never explains how a small country could compel a famously stubborn, impulsive and nationalist president to do something he did not otherwise want to do. On the other, Israel has an “inherent drive to terri- torial expansion and for more resources” and it wants “the United States out [of the Middle East] because the United States has for 80 years constrained [it].” He ar- gued that Israel’s cratering support in America means its leaders want to “get what we can while we can”. Beyond Israel, he believes that Ameri- can policymakers “need to understand that we now share the world with China”. So, he said, “you have to have a power-shar- ing agreement, and the most obvious one that I can think of is based, like all good things, on geography.” That entails accept- ing that America “is not going to defend and cannot defend Taiwan” because “we’ve reached the limits of our power.” It also means that “Europe needs to be an ally.” He said the continent “has to be at the centre of the West, as Europe is the West”. He has little patience for European leaders, calling the heads of France, Ger- many and Britain “buffoons”. But, he said, “Europe is the global centre of beauty” and “things that are beautiful are worth pre- serving.” Asked whether America First means doubling down on Europe as an al- ly, Mr Carlson was clear: “Of course…not just out of sentimental love of Europe,” but to counterbalance China’s ambitions. Kingmaker, not candidate On the subject of who will inherit Trum- pism post-Trump, Mr Carlson was circum- spect. He fears that, having been “so slan- dered as a bigot—which I’m not”, any en- dorsement from him risks doing more harm than good. Although some have floated him as a possible 2028 presidential candidate, he laughed off the idea (“Of course not”). But he’s not giving up his mi- crophone. Asked whether he is “trying to shape the outcome or the direction of the United States”, he replied simply: “As hard as I can. I live here.” ■ A thorn in the president’s side The Democrats Collateral advantage “CASKETS DEMAND explanations,” says Matt Cavanaugh, running for Congress in Colorado. The Iraq war veter- an and first-time Democratic candidate says anxiety about the conflict with Iran looms large among voters. His district con- tains five military bases, and one of the 13 Americans killed in the war was stationed there. Mr Cavanaugh argues the adminis- tration owes the public a clearer sense of purpose. Donald Trump “hasn’t provided an explanation worth fighting for”. Mr Cavanaugh’s district may be espe- cially attuned to the war. Yet as the conflict fuels anxiety about rising prices and a slowing economy, it is becoming an increasingly important issue for voters across America. That is to the Democrats’ advantage. On Kalshi, a prediction market, the odds of the party winning back the House of Representatives in the midterm elections this November have risen from 81.5% before the war to 83.3% today. The odds of Democrats taking the Senate— once seen as a remote prospect—have jumped from 40.6% to 49.8%. In many ways Mr Trump has made the Democrats’ job easy. The president’s net approval rating was minus 18 percentage points in mid-February. Then he launched a war that less than a third of Americans wanted. A mere 36% approve of his han- dling of Iran, according to the latest Econo- mist/YouGov poll. The administration’s muddled messaging, ever-shifting war aims and lack of a clear timeline have given Democrats an inviting target. Yet early on congressional Democrats seemed inclined to hold their fire. Nearly all opposed the war on the grounds that it was unnecessary and possibly illegal. But no one wanted to be seen as an apologist for the ayatollahs. There was also the pos- sibility that Mr Trump might pull off an- other quick Venezuela-style success. As a result, the party’s initial response looked like finger-wagging, focusing on lawyerly questions of process and the president’s refusal to consult Congress. In a statement released on the first day of the air strikes, Hakeem Jeffries, the top Democrat in the House, sounded angrier about being by- passed than about the war itself. But after three weeks of bombing, America and its partner Israel have yet to achieve their political goals. Democratic critics are sounding more assertive. Surg- ing petrol prices—a result of Iran’s attempt WASHINGTON, DC A muddled war and rising prices are boosting Democrats’ midterm hopes You can find our recent interview with Tucker Carlson here: economist.com/insider Watch Insider C002 -- 20 of 78 -- 22 The Economist March 21st 2026 United States ▸ ⏩ to close the Strait of Hormuz—have given them fodder for their attacks. Ten days after his initial statement Mr Jeffries wrote on X: “Republicans are crashing the econ- omy, gas prices are out of control and the extremists are spending billions dropping bombs in the Middle East.” Democrats have pounced on a growing sense that Mr Trump has no strategy. “It is so much worse than you thought,” said Elizabeth Warren after a classified Senate briefing by administration officials on March 3rd. Her colleague, Chris Murphy, went further: “This is the most incompe- tent, incoherent war America has fought in the last 100 years, and that’s saying a lot.” Reports that Mr Trump may have underes- timated Iran’s ability to use the Strait of Hormuz as leverage have raised fresh ques- tions about his strategy. “A college student with a basic understanding of geopolitics could tell you that Iran’s greatest leverage is this narrow passage,” said Chuck Schumer, the top Democrat in the Senate. Democrats have also criticised the in- fluence Israel appears to wield over the Trump administration—an argument ech- oed by some conservative pundits. “So Netanyahu now decides when we go to war?” wrote Senator Ruben Gallego on X, referring to Binyamin Netanyahu, the Is- raeli prime minister. Jeff Merkley, another Democratic senator, has called the Ameri- can government a “little pet puppy” of Is- rael. Their views are representative. A Quinnipiac University poll conducted from March 6th to 8th found that 62% of Democratic voters believe America is too supportive of Israel, compared with 17% of Republicans. Overall, 44% of voters say the same—the highest share since Quinnipiac first asked the question in 2017. For all their criticism, Democrats have little power to end the war in the near term. An early effort to force Mr Trump to seek formal approval before continuing military action failed in both the House and Senate despite overwhelming Democratic sup- port. Now the Pentagon is preparing a re- quest to fund the war and restock its muni- tions, potentially worth tens of billions of dollars—a cost that will give Democrats a new line of attack. It may pass the House but its fate in the Senate is much less cer- tain. Still, the Pentagon has enough money to continue the war even without a top-up. The vote on funding may expose divi- sions within the Democratic Party. The question lawmakers face, says a Democrat- ic aide, is “do we give our soldiers what they need, or do we try to choke this off?” It is a dilemma Republicans might be hap- py to force. Some moderate Democrats are likely to back the effort. Progressives, though, say choking off the war is the right move as a matter of both principle and pol- itics. That is “a lesson that we should have frickin’ learned already”, says Adam Smith, the top Democrat on the House Armed Services Committee, referring to America’s experience in Afghanistan, Iraq and Libya. Looking ahead to the midterms, some Republicans argue that petrol prices will decline once the war ends—and that eight months are an eternity in politics. “Voters will have fully moved on by November” if the conflict ends soon, says Jim Hobart, a Republican strategist. But recent evidence suggests a surge of enthusiasm among Democrats that is not related to the war. High turnout propelled the party to victory in the Virginia and New Jersey governors’ races last autumn. In Texas primaries last month turnout among Democrats jumped by 120% com- pared with 2018. Their anger is organic, says Anna Greenberg, a Democratic poll- ster. “It’s not being driven by Democrats in Washington.” In a sense, then, Democratic politicians need only let Mr Trump do their work for them. ■ War and agriculture From Hormuz to the heartland JAY COKER grows enough rice each year for every American to have half a help- ing. In April he will begin planting his pad- dies in the prairies of Arkansas. But this season’s harvest will cost more than usual. In the almost three weeks since the war with Iran broke out, the price of the fertil- iser he uses has jumped by $50 an acre, adding an unexpected $200,000 to his costs. “We’re very concerned right now,” he says. “Margins are razor-thin.” Markets have been rattled by surging energy prices since Iran basically closed the Strait of Hormuz on March 2nd. The waterway is a crucial transit point for oil, but it carries other commodities too. Around a third of the world’s seaborne supplies of fertiliser, much of it made from oil and gas by-products, passes through it. Since the closure, the price of urea, the most common nitrogen-based fertiliser, has risen by 20% at the port of New Or- leans. Other such chemicals have also be- come more expensive (see chart). Farmers across America are feeling the squeeze. Some farmers locked in fertiliser con- tracts earlier this winter, shielding them- selves from the volatility. But others are now scrambling. Without the chemicals, yields can fall by as much as half. Many say they plan to pivot this spring from fertilis- er-hungry crops, such as maize, to less in- tensive alternatives, such as soyabeans. “We’re out here trying to figure out how to get the cattle fed, keep the ice broken on the water and pay next year’s bills,” says Heather Hampton Knodle, a fifth-genera- tion farmer in Illinois. “Then the United States bombs Iran and we’re supposed to hedge against that?” Even before the war, many farmers were struggling. Rice, soyabeans and maize (corn to Americans) have not generated profits for years. Inflation has pushed up the cost of machinery and land, and Do- nald Trump’s tariffs have added further pressure. (Soyabean growers are still reel- ing from China’s retaliatory cuts to pur- chases.) Meanwhile, crop prices have slumped. Good weather has boosted sup- ply, while competition from countries such as Brazil, India and Russia has intensified. In September the head of the National Corn Growers Association warned of a fig- urative “four-alarm fire in the countryside”. A poll conducted last year found that 12% of members were considering retiring or leaving the business this year. Trumpland America’s rural heartland is unusually loyal to Mr Trump. In counties where farming generates at least a quarter of earnings, he won 78% of the vote in 2024, improving on his margins in the previous two presiden- tial elections. But a war that makes farm- ers’ jobs harder may test that allegiance. In a letter to the White House, the American Farm Bureau Federation, an agricultural lobbying group, thanked the president for putting farmers “on better economic foot- ing” with $12bn in emergency aid. But it also warned that high fertiliser prices could add to farmers’ financial stress, and urged him to suspend countervailing du- ties on fertiliser and send the navy to es- cort shipments through the strait. (Experts do not think such escorts would solve the problem.) Ms Hampton Knodle reckons the problems now run too deep for a single stimulus package to fix. Even if the war were to end tomorrow, much of the damage has already been ATLANTA How the conflict in Iran is hurting American farmers Undesirable growth United States, fertiliser prices, $ per tonne* Source: North Dakota State University *Spot prices at port of New Orleans 1,000 800 600 400 200 0 26 25 24 23 22 21 20 2019 Russia invades Ukraine Urea Sulphur Sulphur US-Israeli strikes on Iran begin C002 -- 21 of 78 -- 23 The Economist March 21st 2026 United States ▸ done. Stephanie Roth of Wolfe Research, an economics consultancy, estimates that disruptions to the fertiliser supply chain will push food prices up by 2% for Ameri- can consumers. If the conflict proves lon- ger-lasting than expected, the impact could be worse. But unlike an oil shock, where prices at the pump rise within a week, these increases will take three to six months to reach grocery-store shelves. By then Republicans will be campaigning across the country for the midterm elec- tions and will need to explain why high prices are not their party’s fault. Mr Coker, the rice farmer, does not blame Mr Trump. He says the president, in waging war on Iran, is responding to threats to American security and trying to steady a volatile region. Still, he worries. Perhaps Mr Trump will find ways to com- pensate farmers for the effects of his mili- tary adventure. Otherwise, their problems will become everyone else’s problems. ■ Counterterrorism Distracted defences AS AMERICA WAGES war in Iran, a spate of recent incidents has raised concerns about security at home. Federal officials are investigating shootings in Texas and Virginia as potential acts of terrorism, and an attack on a synagogue in Michigan as targeted violence against Jews. In New York police recently arrested two teen- agers—allegedly inspired by Islamic State—for throwing homemade bombs at a protest. In California an FBI warning that Iran could send drones to the west coast made headlines, prompting the governor to deny that there was an imminent threat. Iran is not accused of sponsoring any of the attacks, but the war has created a sense of unease. The gunman in Texas had an Iranian flag in his apartment; the syna- gogue attacker had lost relatives in Israeli strikes in Lebanon. Iran itself has a history of backing terrorism abroad, including at- tacks on American targets. Authorities have linked it to assassination attempts against two of Donald Trump’s former ad- visers and, later, the president himself. Mr Trump is projecting calm. On March 9th he was asked whether Iran had activat- ed sleeper cells in America. “They’ve been trying for a long time,” he replied. “We’ve been very much on top of it.” Yet there is growing debate about America’s counter- terrorism capabilities—and whether the country is as prepared as it should be. Much of the criticism centres on the Department of Homeland Security (DHS), which was created after 9/11 to “secure the United States from terrorist threats or at- tacks”. Under Mr Trump, however, it has become the engine of his mass-deporta- tion campaign. Public records obtained last year by the Cato Institute, a think- tank, show that more than 12,000 of the de- partment’s investigative officers, some of whom surely worked in counterterrorism, were reassigned to immigration enforce- ment. Roughly 2,000 Border Patrol agents normally tasked with guarding against threats were pulled off their duties to help Immigration and Customs Enforcement (ICE) arrest and detain migrants. A former DHS official says counter- terrorism received short shrift in senior- level meetings, with terrorism-related cor- respondence sometimes ignored by col- leagues focused on immigration enforce- ment. A 22-year-old was installed to over- see the dismantling of a DHS agency dedicated to terrorism prevention. When the administration does talk about terro- rism, it tends to link it to immigration. Al- leged drug-runners in the Caribbean have been branded “narco-terrorists”. The presi- dent claims some foreign agents “came in during the Biden open border period”. The same pattern is evident at the FBI. Early in Mr Trump’s second term, nearly a quarter of the bureau’s agents were reas- signed to immigration enforcement, di- verting some from counterterrorism. For agents who work with confidential sourc- es, even a few days away from their job can jeopardise investigations, says Michael Feinberg, a former counterintelligence agent. “If a recruited asset tries to get me word that there is an imminent terrorist threat or espionage leak, and I can’t re- spond because I’m doing perimeter securi- ty for ICE for a week, there’s real potential for risk and damage.” The FBI’s leaders also appear to be prio- ritising political loyalty over expertise. Days before the Iran war began, the bu- reau’s director, Kash Patel, fired a dozen staff, including several agents who worked in a unit monitoring threats from Iran. They were reportedly dismissed for inves- tigating Mr Trump’s alleged mishandling of classified documents found at his Flori- da resort after his first term. Mr Feinberg, who investigated China’s intelligence ser- vices, resigned last year rather than face a demotion and a polygraph test about his friendship with another agent Mr Trump disliked. On March 17th Joe Kent, a senior counterterrorism official outside the FBI, resigned in protest over the Iran war. The administration denies that any of its actions have made the country less safe. Mr Trump instead argues that the real threat to America’s counterterrorism capa- bilities comes from the “Democrat shut- down”. Congressional Democrats have re- fused to fund the DHS unless the bill in- cludes new restraints on ICE. Yet most of the department’s employees are consi- dered essential and are therefore still re- porting to work, albeit without pay. One former counterterrorism official reckons the shutdown would not hurt investigative capacity, but could lower morale. Experts tend to preface any discussion of the current risk with reminders of the superiority of American intelligence. “We could get through this period without much retaliation,” says a former counter- terrorism official. Yet the attacks in Texas, Virginia and Michigan highlight the dif- fuse nature of the threat. Nor should Iran be underestimated. “The Iranian services”, says the former official, “have been known to be capable—and patient.” ■ LOS ANGELES Is an obsession with immigration enforcement leaving America exposed? You’re focused on the wrong thing C002 -- 22 of 78 -- 24 The Economist March 21st 2026 United States Does Donald Trump even care about the midterms? LATE LAST year, when some influential voices within the Republican Party were calling for a crackdown on anti- semitism in its midst, Vice-President J.D. Vance tried to stifle them by ridiculing “endless, self-defeating purity tests”. Appear- ing at the annual conference of Turning Point USA, which organis- es young conservatives, Mr Vance said Republicans should devote themselves to sustaining a broad coalition for Donald Trump rath- er than waste their energy cancelling each other: “We don’t care if you’re white or black, rich or poor, young or old, rural or urban, controversial or a little bit boring.” To his list of adjectives the vice-president can add “Islamo- phobic”. Mr Trump has courted anti-Muslim bigotry since he ran in 2015, but lately some Republican officials have been revelling in it. “Muslims don’t belong in American society,” Andy Ogles, a member from Tennessee, posted on X on March 9th. Three days later Randy Fine, a congressman from Florida, wrote, “We need more Islamophobia, not less.” To caption an image of the burning Twin Towers juxtaposed with one of Mayor Zohran Mamdani of New York, a Muslim, Senator Tommy Tuberville of Alabama wrote, “The enemy is inside our gates.” Mr Trump, Mr Vance and other Republican leaders have not objected to any of this. In their commitment to a big tent they would deserve points for consistency were it not for the one cate- gory of hater, or disliker, or mere malcontent whom Mr Trump and his lieutenants have always stopped at nothing to silence: any Re- publican who has anything negative to say about Mr Trump or his policies. To preserve party comity—supposedly—antisemitism and Islamophobia get a pass. But when it comes to fealty to Mr Trump, the president is administering what Mr Vance ought to re- cognise as an endless purity test, one that, for the Republican Par- ty as it approaches the midterms, is becoming self-defeating. In any White House there is no more precious resource than the president’s time. Yet on March 11th, with the country at war, Mr Trump made a rare appearance on the campaign trail, in Ken- tucky. He was there not to defend a vulnerable Republican con- gressman or to undermine a vulnerable Democrat, but to attack Thomas Massie, a Republican incumbent in a seat so safe that he was not even challenged by a Democrat in 2024. Mr Massie, a lib- ertarian, had the effrontery to defy Mr Trump over his initial reluc- tance to release the Epstein files, and more recently over the war. So Mr Trump, calling Mr Massie “disloyal to the United States”, sought to boost his opponent in what has become one of the most expensive House Republican primaries. Mr Trump’s allies are also spending millions of dollars in sol- idly Republican Indiana, not to help congressional candidates but to back primary challengers to state legislators. Mr Trump wants retribution against the state senators who opposed his demand to gerrymander congressional districts there. Perhaps most damag- ing to the Republican cause has been Mr Trump’s dithering about endorsing Senator John Cornyn, a Republican senator from Texas now in a primary run-off against the state attorney-general, Ken Paxton. If Mr Cornyn makes it to the general election the Demo- crats would have far less chance of winning his seat, and the Re- publican Party could divert money to other races. But despite—or perhaps because of—his personal and professional transgres- sions, Mr Paxton is a MAGA darling, whereas Mr Cornyn, though long since truckled to Mr Trump, has at times broken with him. Mr Trump has also tied congressional Republicans in knots by declaring he will not sign anything into law until they pass the so- called SAVE America Act, which would require proof of citizen- ship and impose other burdensome regulations on voting. The bill, a MAGA grail, passed the House but lacks enough support in the Senate. Mr Trump is further impeding the legislation’s pro- gress by demanding more MAGAfications to it, such as “NO TRANSGENDER MUTILATION FOR CHILDREN”. Mr Trump has occasionally shown sensitivity to broader public opinion, such as by backing away from his most egregious mass- deportation tactics, but lately he has been demonstrating at least as much indifference. On March 16th he delighted in boasting to reporters about the “onyx and stones” in the jumbo ballroom he is building, even as cash-strapped Americans were fretting about spiking petrol prices. Endless game What is going on? It is possible Mr Trump believes that the SAVE Act would, as he has said, “guarantee the midterms” and that his edifice complex will somehow help, too. But that would be delu- sional (in fact, the SAVE Act could disadvantage Republican can- didates). Mr Trump may instead be planning some dramatic inter- vention in November to prevent votes from being counted fairly, as many Democrats fear. Yet, as is sometimes the case with Mr Trump, the very opposite is at least as plausible: he may have long since given up any hope Republicans will overcome historical pat- terns and his own dismal approval rating and retain their paper- thin majority in the House. Recognising he has little time left, he is playing for glory, and his own pleasure. The most plausible scenario is that Mr Trump does not know what he will do this autumn. This is a president who was willing to commit America to war like a jazz musician settling down at a pi- ano, confident he would find the right keys at the right moments. What is certain is that Mr Trump is sticking with his one guiding principle, securing the fierce loyalty of his MAGA base so that he can use it to intimidate other Republicans and keep them in line. Proving his own loyalty to MAGA has become only more important since he shook the faith of some supporters by going to war. This is probably bad news for the Republican Party, and America. LEXINGTON He is more concerned with dominating his party and securing his place in history C002 -- 23 of 78 -- 25 The Economist March 21st 2026 The Americas Cuba and the United States Blackout economics ON MARCH 16TH Oscar Pérez-Oliva Fraga, a great-nephew of Fidel Castro, appeared on “Mesa Redonda”, a state-tele- vision programme. He announced that Cubans living abroad would now be per- mitted to own businesses and invest in in- frastructure on the island. (A nationwide power blackout during his appearance meant few Cubans heard what he had to say.) It was the second major concession from the regime in a matter of weeks. In February the government quietly began to allow private firms to import fuel, breaking the state’s long-held monopoly. These reforms mark the most signifi- cant economic liberalisation since Fidel Castro first permitted limited private en- terprise in Cuba in the 1990s. They have happened thanks to intense pressure from the United States. Cuba is not the flashiest target for gunboat diplomacy. It lacks Ven- ezuela’s oil wealth, or Iran’s nuclear threat. But Donald Trump and Marco Rubio, his secretary of state, are focused on it none- theless. Run by the same repressive regime since Fidel Castro seized power in 1959, Cuba is on America’s doorstep. The re- gime’s support for China and Russia, and the steady flow of Cuban migrants to Flori- da, have long posed a foreign-policy chal- lenge. For Mr Rubio, a son of Cuban exiles, it is personal. Cuba, he has said repeatedly, must change. In January American special forces snatched Nicolás Maduro from Venezuela and the Trump administration took con- trol of the country’s oil output, which had previously been Cuba’s main source of en- ergy. Since then the United States has be- sieged Cuba’s economy. It has blocked fuel shipments and coerced countries to expel Cuban medical missions, stanching the re- gime’s supply of foreign currency. The hope has been that the population will rise up and oust the regime from power, or that the regime will have no choice but to deal with the Americans on favourable terms. Life in Cuba was already hard thanks to the regime’s disastrous economic ideology and the American trade embargo. Mr Trump’s new pressure campaign has made things harder still. In the deserted streets of Havana, the capital, residents must queue for hours each day to buy fuel. The shutters on empty state-run shops are closed. As the peso plunges on the black market, a typical monthly salary now buys barely a dozen eggs. The Caracas condition Before the blockade, Cuba consumed roughly 100,000 barrels of oil a day (b/d) and produced 40,000 itself. Half of the deficit, at about 30,000 b/d, was being shipped in from Venezuela at a steep dis- count. The rest, imported mainly from Mexico and Russia, stopped flowing in January after Mr Trump threatened tariffs on any country caught supplying the is- land. The last vessel to approach, a Rus- HAVANA AND MIAMI The Castro regime destroyed Cuba’s economy. Now it is at Donald Trump’s mercy ⏩ C002 -- 24 of 78 -- 26 The Economist March 21st 2026 The Americas ▸ ⏩ sian ship carrying 200,000 barrels of die- sel, turned away on February 28th. The consequences have been dramatic. Airlines from Canada and Russia, which together send more tourists to Cuba than the rest of the world combined, have can- celled flights because there is no kerosene on the island for the return journey. Glitzy hotels along the coastline, built over the past decade by GAESA, the military con- glomerate that controls much of the econ- omy, lie empty. Hospitals have cut services. At night much of the country lies in dark- ness. The consensus is that things are worse than during the “special period” in the early 1990s, when the collapse of the Soviet Union and the loss of its economic patronage plunged Cuba into recession. Ordinary folk are suffering more than the regime. The number of protests docu- mented by Cubalex, a human-rights group based in Washington, rose from 30 in Janu- ary to 130 in the first half of March (see chart). On March 13th protesters ransacked a Communist Party building in Morón in central Cuba. But fears of reprisal like the mass arrests that followed protests in July 2021 keep many people quiet. Emigration is the preferred response. Since 2021 Cuba’s population has fallen from 11.2m to perhaps 8.6m. Some 80% of those who left were between 15 and 59 years old, leaving Cuba the oldest country in the Americas. A quarter of the population is over 60. The regime is not an easy target. The Communist Party, the armed forces and the security services form a single inter- locking system. It was built up over de- cades by Fidel’s brother, Raúl, during his long tenure as head of the armed forces. (He took over from Fidel as president in 2006.) Senior officers run the most lucra- tive parts of the economy through GAESA. Intelligence operatives staff the foreign ministry’s North America desk, which manages relations with the United States. Power still resides with the Castro family: Miguel Díaz-Canel, the current president, publicly vowed at his inauguration in 2018 to defer to Raúl on all major decisions. But America’s recent coercion has com- pelled the regime to talk, partly because of the loss of Cuba’s Venezuelan lifeline. Since the United States grabbed Mr Madu- ro, the Cuban regime for the first time in its history has had no patron left to turn to. On March 13th Mr Díaz-Canel went on television to acknowledge that his govern- ment was talking to the Trump administra- tion. He looked strained, striking an un- characteristically meek tone. A bed of nails To understand the regime’s predicament, look at the economy. Cuba’s has long been one of the world’s strangest and poorest. The originally centralised, Soviet-reliant system has gradually evolved into a hybrid. In the late 1990s amid a deep recession prompted by the collapse of the Soviet Un- ion, the regime grudgingly permitted lim- ited self-employment. Taxi drivers, bar- bers, entertainers and others could work for themselves. In 2021, as the covid-19 pan- demic slashed revenue from tourism, the role of private businesses was expanded (though still small and heavily taxed). The state-run economy is heavily degraded. It now runs in parallel with the private sector. Sugar exports, once the state’s mainstay, fell by 90% in the two decades to 2010 as a million Cubans emigrated. The government still sets prices and owns most firms. It commands nearly all economic resources, which it stubbornly misallocates towards struggling industries such as mining and smallholding agricul- ture. Harvests are virtually non-existent. Exports, in 2022 dollars, fell by at least 75% between 2000 and 2025. That was driven partly by agriculture’s collapse. It account- ed for just 15% of exports in 2025, down from 52% in 2000. As state profits have van- ished, the central bank has printed cash to inflate away domestic debt, reducing the peso and state salaries to near worthless- ness. According to several Western offi- cials, Cuba drew in a paltry $9bn in foreign income in 2025, about a quarter of what was earned by Honduras, a regional peer with a similar population. Part of Mr Rubio’s strategy has been to methodically attack each remaining source of dollars. The largest part, roughly $4bn in 2025, came from exporting Cuba’s excel- lent doctors. Cuba had some 20,000 med- ical staff working in countries from Italy to Jamaica at the start of 2026. Foreign hospi- tals must pay the Cuban government di- rectly, with a pittance returned to the doc- tors as a salary. At least half were in Vene- zuela and have now been sent back to Cuba at America’s instruction. Mr Rubio has pressed at least 15 other countries to expel their Cuban medical missions. He has labelled the practice human traffick- ing, threatening sanctions and revocation of visas. Italy and Qatar, where an entire hospital is staffed with Cubans, have so far resisted. Poorer places like Jamaica, Hon- duras and Guatemala have conceded. The fuel blockade has crippled the rest of the economy. Tourism, mining and manufacturing, which last year provided another $2bn in foreign currency, have col- lapsed. Cobalt, nickel and zinc exports were worth at least $600m in 2025; now Sherritt, a Canadian company that is the sole Western mining firm on the island, has suspended operations for lack of fuel. The only source of foreign income left un- touched is the $3bn sent to the island in re- mittances every year. In any case, state- owned exchanges, which pay the official rate of 24 pesos per dollar, have long been undercut by the black market, which cur- rently pays around 500 pesos per dollar. Attention has also been focused on GAESA, the armed-forces business empire that owns Cuba’s biggest bank, most tou- rist hotels and its biggest shops. It is ru- moured to be fabulously wealthy, diverting tens of billions of dollars for the Castro family and other power-brokers. The reali- ty, apparent from a review of its accounts and conversations with several Cuban offi- cials, seems more modest. Before America tightened restrictions GAESA had barely a billion dollars in reserves. That figure is now falling fast, as its posh hotels lie emp- ty. The conglomerate had pumped more than 70% of its investments into tourism in the past decade, a bet that has spectacular- ly failed. Cuba’s total foreign reserves are a closely guarded secret. Several officials es- timate the central bank holds no more than $3bn. The Economist Intelligence Unit, a sister company of The Economist, forecasts that GDP will shrink by 7.2% in 2026. Against that, letting exiles invest in Cuba barely registers. Juan Triana, a Cuban economist, says the regime’s two great mistakes were fail- ing to reduce Cuba’s dependence on for- eign patrons and rejecting deep structural reform. The restructuring of state enter- prises, the creation of a credible monetary system and a functioning tax regime might Empty and angry Cuba Sources: Kpler; Cubalex *From top four countries. Including shipments en route †To March 15th 2026 120 90 60 30 0 80 60 40 20 0 2025 2026 Mar Feb Jan Dec Nov Oct Crude-oil imports*, ’000 barrels per day Number of protests† Like lemmings Cuba, tourist arrivals, m Source: ONEI 5 4 3 2 1 0 25 20 15 10 05 2000 C002 -- 25 of 78 -- 27 The Economist March 21st 2026 The Americas ▸ have preserved the socialist model many Cubans still value. Not everyone wants a McDonald’s on the Malecón, Havana’s seafront promenade, but they do want an economy that functions. The question is whether a deal with the United States can achieve it. The Cubans involved in the talks certainly have the power to make changes. Mr Rubio has been talking to Raúl Guillermo Rodríguez Castro, Raúl Castro’s grandson. The 41- year-old holds no official position, but as a trusted former bodyguard for his grandfa- ther he has a hot line to him. Two other more experienced figures are also in- volved: Colonel Alejandro Castro Espín, Raúl Castro’s son and Mr Rodríguez Cas- tro’s uncle, a key figure in secret Obama- era talks; and Josefina Vidal, a veteran dip- lomat who once ran the foreign ministry’s North America desk. America’s clearest aim is economic. The outline is vague but likely to include giving American firms access to energy, ports, tourism and telecoms. Mr Trump has coveted Cuba’s hospitality market for de- cades; the Trump Organisation registered its trademark in Havana in 2008 for hotels, casinos and golf courses, and sent execu- tives to scout sites in 2013. Mr Pérez-Oliva Fraga told NBC, an American television channel, that Cuba is open to a “fluid com- mercial relationship” with American firms. In return, the Trump administration ex- pects liberalisation: the removal of restric- tions on the size of private firms, the open- ing of the banking system, and eventually even the dismantling of GAESA’s monopo- lies. All this would require the United States to change its own laws, including those governing correspondent banking. Yulieta Hernández Díaz, who owns a small private construction firm in Cuba, worries that the main beneficiaries would be large American corporations that curry favour with the regime, while leaving local busi- nesses at a disadvantage. On the political front, American policy increasingly looks like a version of the face-lift given to the regime in Venezuela. People familiar with the talks say Ameri- can negotiators are gunning for Mr Díaz- Canel. But forcing him out would be no real victory, since he is widely and openly derided as a “singao”, a Cubanism meaning something between “motherfucker” and “fuckwit”. He was installed by the regime precisely because he would not make dras- tic changes (his second five-year term ends in April 2028). Cuba has also agreed to re- lease political prisoners: on March 12th it said 51 would be freed. That leaves more than a thousand behind bars. Keeping the Castros Notably, the United States does not ap- pear to be demanding action against Cas- tro family members, who remain Cuba’s powerbrokers. A deal whereby a Castro wields real power from behind the scenes while a new figurehead holds office would be a “through-the-looking-glass” outcome, says Ric Herrero of the Cuba Study Group in Washington, which advocates engage- ment with Cuba’s government. Mr Trump has said nothing about democracy or polit- ical liberalisation. Nor has Mr Rubio. Whether the Trump administration can use the threat of economic and military co- ercion to steer Cuba as it wishes is unclear, even though its leverage is far greater than Barack Obama had when he negotiated an opening in 2014. Cuba’s regime is much weaker, its main patrons are gone, and the new blockade gives America the power to ruin the island. “They are over a barrel,” says a former American official close to the negotiations. “They are going to do what it takes to save their necks.” Federal prosecu- tors in Miami have been ordered to build criminal cases against Cuban leaders, pro- viding yet another cudgel. The Castros may think they can use di- alogue to avoid a reckoning, wagering that Mr Trump’s power will wane after the American midterms in November. That would be a failure to understand how dire their situation is, says one regional dip- lomat, even if the current American pres- sure wanes. Mr Rubio, who has built his political career on his hard line against the regime, and who some betting markets now have as the most likely next president of the United States, seems willing to be patient. In February he laid out a vision of gradual transformation. “Cuba needs to change,” he said. “It doesn’t have to change all at once.” But he does not yet sound sat- isfied with the regime’s offerings. On March 17th he said the announcements a day earlier were “not dramatic enough…It’s not going to fix it,” he said. Mr Rubio will have to keep an eye on the Cuban-Americans who helped him rise to power. Any route to the presidency probably runs through them. They are sus- picious of any transitional deal. The pros- pect of being allowed to take part in Cuba is “tremendously exciting”, says Joe Garcia, a Miami-born Cuban-American former member of Congress. But he, like others, does not trust the regime to honour any promises. “It’d be crazy for anybody to go and invest their money” there, because the government could change the rules at any time, says Bryan Calvo, the Cuban-Ameri- can mayor of Hialeah, Florida’s most Cuban city. When the regime feels strong it suffocates private business with new reg- ulations or arbitrary audits, he says. Three Cuban-American members of Congress—Carlos Giménez, María Elvira Salazar and Mario Díaz-Balart—have staked out harder positions still, insisting that nothing short of regime change and an exit of the Castros would suffice. “We haven’t fought for 67 years, with prisoners and deaths, to earn the right to invest un- der the rules of a communist regime,” says Marcell Felipe of the Museum of the Cuban Diaspora in Miami. In Miami, on the night Mr Trump began bombing Iran, a convoy of pickup trucks draped in Cuban flags and Trump 2024 banners blared “Iran now, Cuba next” from loudspeakers. In Havana, a woman born in 1959, the year of Fidel Castro’s revolution, says she will not let herself believe that change will come. “It is like the line on a dying patient’s screen,” she says. “Just gradually failing.” Mr Trump promised to strangle the regime. Now he is poised to make a deal that keeps it in place. He may keep a boot on the regime’s neck. But how likely is that to lead to a truly beneficial transformation? ■ Just another blackout Monday C002 -- 26 of 78 -- 28 The Economist March 21st 2026 Asia Security in Asia Holding fire HAVING MADE a mess of global energy markets by attacking Iran, Donald Trump has begun demanding that Ameri- ca’s friends around the world help open the Strait of Hormuz. In a post to his social network on March 14th, Mr Trump named Asian allies including Japan and South Ko- rea among a list of foreign powers that he hoped would send ships to the Gulf. And not just allies: “I think China should help too,” Mr Trump told the Financial Times. Angered, apparently, by the lack of enthu- siasm, Mr Trump appeared to U-turn a few days later; he insisted that America does “NOT NEED THE HELP OF ANYONE”. But no one really believes that marks the end of the debate. Chinese help is unimaginable. Like In- dia and Turkey, China appears to have cut a deal with Iran to keep supply lines some- what open, including for oil. Yet America’s five Asian allies face a more painful dilem- ma. Iran’s threat to attack shipping near the Strait of Hormuz is badly disrupting energy supplies to Australia, Japan, the Philippines, South Korea and Thailand. These countries worry about their armed forces becoming embroiled in a distant conflict. But they also fear being aban- doned by America—especially if its mercu- rial administration concludes that they are not pulling their weight. Since the start of the war Australia has sent a command-and-control aircraft and some air-to-air missiles to the Middle East. But it has been careful to frame its re- sponse as an effort to help defend the Un- ited Arab Emirates (home to many Austra- lians) rather than as a boost to America’s war effort. South Korea has an anti-piracy force, the Cheonghae unit, that operates in the Gulf of Aden. But redeploying this un- it, or others, might require parliamentary approval. A public backlash to such ideas has already begun (anti-war protesters in Seoul are pictured). “Sending South Kore- an warships is…nothing less than a mili- tary mobilisation supporting the war of ag- gression,” declared the Korean Confedera- tion of Trade Unions. “Trump, who started the fire, charges South Korea a firefighting bill”, read a wry headline in the JoongAng, a South Korean daily. Few Asian leaders will come under more pressure to pitch in than Takaichi Sa- nae, Japan’s prime minister, who was scheduled to meet Mr Trump at the White House as The Economist went to press (part of a trip that was planned before the war). Japan has minesweepers that could help open the strait. But polling suggests 80% of Japanese oppose the conflict. There are also tricky questions about Japan’s pacifist constitution. Laws passed in 2015 by the SINGAPORE, TAIPEI AND TOKYO Will America’s Asian allies get dragged into the war with Iran? → ALSO IN THIS SECTION 29 India’s gas panic 30 Banyan: Mr Good Governance 31 Escaping Yangon 31 A deadly strike on Kabul ⏩ C002 -- 27 of 78 -- 29 The Economist March 21st 2026 Asia ▸ ⏩ arrival of arms it has ordered from Ameri- ca—especially the kind that America and Israel are using in their fight against Iran, such as Patriot missile interceptors. In 2022 Taiwan agreed to buy around 100 PAC-3 MSE missiles (the most advanced Patriot interceptors), with delivery expect- ed in 2025 and 2026. It has also ordered NA- SAMS interceptors and HIMARS rocket launchers. Many of these purchases aim to bolster Taiwan’s defences by 2027—the year by which, so American officials be- lieve, China’s president has ordered his armed forces to be ready to attack or block- ade Taiwan. Any delay in the arrival of these weapons would affect Taiwan’s mili- tary planning. It could also badly damage the public’s morale. All of this has Asian allies thinking about their Plan B. “If we rely on others, there’s a chance they don't come through,” South Korea's Mr Lee warned his ministers last week. "We must always consider what we will do if, for any reason, external sup- port were to disappear.” ■ late Abe Shinzo, then the prime minister, allow the government to engage in “collec- tive self-defence” beyond its borders. Minesweeping operations in the Strait of Hormuz were among the scenarios debat- ed in parliament at the time. But when pressed by opposition leaders on whether Japan would aid America if it launched a pre-emptive strike that led to a war, Abe dismissed the possibility: “Japan would not support such a country,” he said. Allies in Asia nevertheless may feel ob- liged to answer Mr Trump’s call. He has long threatened to withdraw American support for allies unless they pay tribute to Uncle Sam. Asian allies hand over billions of dollars a year to ensure American secu- rity commitments. And during recent wrangling over Mr Trump’s tariffs they have pledged to plough more than a tril- lion dollars into America’s economy. Now they are worrying that American forces currently stationed in Asia will leave for the Middle East regardless. Already an American Marine expedi- tionary unit based in Japan has begun sail- ing towards the Gulf at high speed. The last time it departed the Pacific—leaving Asia without an American crisis-response force—was in 2004, during the war with Iraq. America has also redeployed Patriot interceptor missiles and parts of a THAAD missile-defence system that is based in South Korea. It is possible to overstate the signifi- cance of these movements. The expedi- tionary unit is of an older design—not the newfangled sort that would be most useful in preventing a Chinese attack on Taiwan. And experts say that America can continue to deter North Korea without the THAAD system. All the same, the redeployments are fuelling grave doubts about America’s commitment to the region. Lee Jae Myung, South Korea’s presi- dent, expressed disappointment that American arms had been removed from his country. When the THAAD system was first sent to South Korea in 2017, it sparked fury in China. The Chinese government re- sponded by encouraging consumers to boycott South Korean goods and services, causing massive economic losses. South Korea held firm, despite the costs, and the THAAD system remained. Now bits of it have suddenly been whisked away. “The stark reality is that we cannot always get our way,” Mr Lee told ministers attending a cabinet meeting. Taiwan is in perhaps the most precari- ous position. America is not bound by trea- ty to defend the island, as is the case for other Asian allies. But it has long pledged to deter a Chinese assault by selling Tai- wan weapons it can use to defend itself, a commitment embedded in American law. Taiwan’s government now worries that the conflict in the Middle East might delay the The energy shock in India A cold shower JUST BEFORE midday on March 17th, the Nanda Devi docked at Vadinar in west- ern India. Three days before, the giant tanker had managed a feat that a month ago would have been entirely unremark- able: it passed through the Strait of Hor- muz. The Nanda Devi is one of two Indian liquid petroleum gas (LPG) tankers that have made it through the choke point fol- lowing negotiations with Iran’s govern- ment. Together they were carrying some 93,000 tonnes of LPG, enough to supply In- dia for roughly one day. That will bring a measure of relief to a country experiencing a fearsome gas crunch. Restaurants all over India have closed their doors for lack of gas to cook with. Roadside stalls have hiked their pric- es. Gas-dependent businesses from fertil- iser plants to crematoriums have paused operations. In many cities people have had to join long queues to get the gas cylinders they use to heat food (only around 5% of Indian homes have piped gas). Shyam Ku- mar, a vegetable seller from Delhi, told the Indian Express his family had been left eat- ing roti (flatbread) and bananas. India consumes around 31m tonnes of LPG each year, most of it used for cooking. Around 60% of that is imported, making India the world’s second-largest importer after China (see chart). Before the war some 90% of those imports came from Qa- tar and other countries in the Middle East, via the Strait of Hormuz. With little in stor- age, India has been left scrambling. “This is not a normal energy-price shock but one where you are worrying about sufficient physical volumes,” says Sonal Varma of Nomura, an investment bank. The country is vulnerable in part be- cause of a past success. In just over a de- cade the number of Indian households us- ing LPG has more than doubled, thanks to welfare schemes that have encouraged people to switch to gas from firewood, which is time-sapping and unhealthy. But as demand for LPG has soared, India has done little to boost domestic production or diversify its supply. The government is now trying to do both at speed. It is competing for replace- ment shipments from countries including America, Australia and Russia. In the meantime it has turned to rationing. Min- isters insist that there will be enough gas for households, even if industry and busi- nesses end up having to accept constraints. But getting the fuel to those who need it most is proving easier said than done. Bookings for domestic gas cylinders are running at around 40% above the usual lev- el. That is because households are order- ing replacements before they really need them, for fear supplies will run out. Indians have not found official messaging very re- assuring. On March 11th Narendra Modi, the prime minister, said there was “no need to panic”. But he also invoked memories of the pandemic by saying, “Like covid time, we will overcome this too.” Gas cylinders are supplied by state- owned oil companies, through 26,000 dealers. But stock is going missing as black-market prices soar. Refilling a stan- dard 14kg cylinder now costs around 4,000 rupees ($43) on the black market, four times the government’s fixed price. “There are dodgy actors out there taking advan- tage,” says Ashok Malik of The Asia Group, a consultancy. DELHI Panicked Indians are scrambling to buy gas Lightning in a bottle Liquefied petroleum gas imports, 2025, tonnes m Source: Kpler Mexico Netherlands Indonesia South Korea Japan India China 40 30 20 10 0 Rest of world Middle East C002 -- 28 of 78 -- 30 The Economist March 21st 2026 Asia ▸ THE VIEW from an aeroplane circling Patna at night could be that of any work-in-progress second-tier city in India. A carpet of dense concrete pat- terned with illuminated streets; glass shopping centres; a half-finished elevat- ed metro line. At ground level, though, it becomes apparent that this is Bihar, India’s poorest state and home to some 130m people. It is the preponderance of bicycles that does it. They long ago receded from much of urban India as the working class came to afford scooters and motorcycles. The roads, the illumination, the shopping centres—even the confidence to venture out after dark—are the doing of Nitish Kumar, who has run the state as chief minister for all but nine months of the past 20 years. In November his coalition was elected for a record fifth time, winning a stonking four-fifths of the seats. This month Mr Kumar an- nounced he would step down and move to the upper house of India’s parliament. The Bihar of today is a showcase of his achievements—and of his shortcomings. Born to an ayurvedic doctor, Mr Kumar exhibited a desire for order from an early age. He insisted that household helps should bathe each day, and splashed antiseptic on those who didn’t, wrote Sankarshan Thakur, a journalist, in “Single Man”, his biography of Mr Ku- mar. At university he maintained a tidy room and handed bars of soap to the cooks. As he wandered the political wilderness, staying over at associates’, he carried a fresh sheet to sleep on. So the descent of Bihar, never orderly, into utter chaos must have hurt all the more. For 15 years Mr Kumar watched as the boisterous and boorish Laloo Prasad Yadav, a predecessor as chief minister, ransacked the state. Kidnappings, extor- a mirror image of the BJP’s Narendra Modi, then chief minister of Gujarat. By 2010 Mr Modi, too, was feted as an ex- ceptional administrator. Both men came from humble backgrounds, both micro- managed their states and both turned elections into referendums on them- selves. The difference was that Gujarat was already prosperous. Mr Kumar had to pull Bihar out of its depths. Another big difference was Mr Ku- mar’s avowed secularism. Mr Modi is an unapologetic Hindu-nationalist. Mr Kumar broke with the BJP in 2013, half- way through his second term, for that very reason. By then the sheen had start- ed to come off Sushashan Babu’s govern- ment, with rising crime and rising expec- tations. Yet Bihar’s political realism forced Mr Kumar back into the arms of Mr Yadav, the man who had destroyed Bihar. Mr Kumar has spent the past decade switching between parties to retain power, his attention distracted from governance. He is now back in bed with the BJP in Bihar, and helps hold up Mr Modi’s government in Delhi. By the time of the state election last year, Mr Kumar had come across a foe that not even he could defeat. Now 75, he is in undeniable, Bidenesque decline. As he moves to India’s upper house, he leaves behind a state that remains India’s poorest. GDP per person, at under $800, is still no more than a fifth of the richest big state’s and on par with that of Con- go. Millions of Biharis migrate to other states for work. Corruption remains endemic. Yet he leaves behind, too, a state that has learnt to expect more from its leaders. Bihar’s people are no longer embarrassed to say where they are from. “The real change”, as Thakur put it in his book, is “within the minds and psychol- ogies of Biharis”. BANYAN States of mind What Nitish Kumar did for Bihar, India’s poorest state tion and murder were the norm. When Mr Yadav was charged with corruption, he installed his illiterate wife as chief min- ister and ruled from prison, still winning elections with canny caste calculus. The economy flatlined. Average annual growth in Mr Yadav’s last term was 3.2%, half the national rate. Incomes were 60% of those in the next poorest state and a mere fifth of those in India’s richest big one. Mr Kumar, mild-mannered but an astute politician, made a pact with the Bharatiya Janata Party (BJP), which com- manded an upper-caste vote base. He eventually won power in 2005 and set to work tackling crime, which dropped by 68% in his first term. He built roads and bridges. He launched a bevy of welfare schemes directed at minorities, oppressed castes, and women and girls. School enrol- ment soared. Health clinics received sup- plies. Grain yields doubled. The economy grew by more than 10% a year on average throughout his first term, a fifth faster than India as a whole. Known as Sushashan Babu, “Mr Good Governance”, Mr Kumar was in many ways The urban poor are most exposed to black-market prices. Many lack the per- mits required to buy gas from official ven- dors. Even in normal times they often rely on secondary dealers. The government says it will crack down on hoarding and profiteering, but so far authorities have an- nounced only a handful of arrests. If India can secure the safe passage of more tankers through the Strait of Hor- muz, it would help ease the pressure. The government has said that 22 more of its oil and gas tankers are waiting to make the journey (gas is more of a worry for India than oil: it has greater reserves of the latter, and can assuage shortages by buying more Russian crude). Subrahmanyam Jaishan- kar, India’s foreign minister, suggested its agreements with Iran could be a template for other countries. Even so, he admitted the scope was limited, with any further movements to be negotiated on a ship-by- ship basis. As the Nanda Devi was crossing the strait on March 14th, a port in the Un- ited Arab Emirates where another Indian tanker was loading oil was attacked by Ira- nian drones. Ms Varma says that until global supply is restored and prices start to normalise, diplomatic efforts to release individual ships are only likely to help at the margins. If the Strait of Hormuz stays mostly closed, the Indian government may be pushed to consider more drastic measures to suppress demand—such as encouraging more people to work from home. ■ C002 -- 29 of 78 -- 31 The Economist March 21st 2026 Asia A dispatch from Yangon Burmese days TRAFFIC IN YANGON moves much fast- er on even-numbered dates. That is when, as a result of fuel-saving measures introduced this month, only cars with li- cence plates beginning 2, 4, 6 or 8 can drive around. Since plates starting with 8 are re- served for vehicles assembled from kits in Myanmar—and there are not many of those—journeys are much swifter than they are on odd-numbered dates, when the rest of Yangon’s car-owners are allowed to spin their wheels. This arrangement is one of several mea- sures recently introduced in a panic after America’s and Israel’s attacks on Iran. Thailand had already banned fuel exports to parts of Myanmar. The cut in oil sup- plies from the Middle East has made things worse, pushing up inflation, which was already high. Indeed, the cost of living is now the main topic of conversation in Yangon— much more so than the civil war that con- tinues to wrack Myanmar’s hilly borders and rural heartlands. Yangon and most other cities are held by the ruling junta. But these areas are cut off from neighbouring countries. Although it is feasible for people and goods to use the roads to get to and from Thailand, the journey is risky and re- quires paying off various armed groups, in- cluding the army, along the way—another reason for the rising cost of imports. In response the government is promot- ing import substitution. International brands are disappearing from supermarket shelves in favour of locally made alterna- tives. One veteran diplomat says the 300 or so army officers who study in Russian mil- itary academies each year are learning about more than just tactics. They are bringing home Putinesque ideas about how to run an economy. For them, autarky is preferable to prosperity. This is the context in which Myanmar’s newly elected parliament held its first meeting on March 16th. Elected in a sham contest from which the opposition was barred from standing, the assembly will nonetheless formally appoint the country’s new leadership, probably by early April. Everyone knows the current “Senior Gen- eral”, Min Aung Hlaing, will stay in charge. But there is some doubt over exactly which post he will take. Observers think he wants to be made president so that he can attend international summits—something up to now denied him as author of the military coup in 2021. Yet the general may also be worrying that giving up his job as com- mander-in-chief of the armed forces might create an opening for a usurper. With the rainy season fast approaching, the army has gone on the offensive. Rus- sian-supplied bombers and helicopters and homemade paragliders—piloted by lone soldiers who drop bombs by hand— give the army an edge over the rebels. That and the methamphetamines that officers are feeding to their troops. Yangon, for all its troubles, is a world away from the fighting. For people with money, things can be good. “Mules” carry- ing huge bags of hard-to-find consumer goods fill inbound flights. But for those at the bottom of the heap, life is far worse. For barefooted children wandering jagged rubbish dumps—and their parents search- ing fetid streams for recyclable scraps— life is increasingly miserable. When the military staged its coup five years ago around a quarter of the population were in poverty. Now half are. Many youngsters in Yangon dream of escape. But America and Britain have re- cently stopped issuing visas to students from Myanmar. Some are learning Japa- nese instead, hoping to be recruited as care workers in old people’s homes in Tokyo or Kyoto. Other opportunities are less entic- ing: scam centres on the border with Thai- land or sex work in Singapore. The people who find ways to get out of Yangon are being replaced by newcomers from the conflict zones. The city is becom- ing more multicultural as groups of dis- placed people arrive from the borderlands and move in with their ethnic kin. Myan- mar’s military leadership may yet achieve its main aim of uniting the country. The irony is that it will have united everyone in hatred of it. ■ YANGON Life in Myanmar’s biggest city is increasingly grim Scaling down Afghanistan and Pakistan Playing with fire BACK IN 2010 it was known as Camp Phoenix, an American base. More re- cently it was called the Omid Addiction Treatment Hospital, where more than 2,000 patients—most of them hooked on heroin or methamphetamine—were given a chance of redemption. Now the site in Kabul, Afghanistan’s capital, will be re- membered for another reason: a Pakistani airstrike on March 16th that killed at least 143 people. Pakistan claimed the attack was “pre- cisely targeted” at a terrorist site. But re- ports from the ground suggest many pa- tients and doctors at the hospital were killed. Though the death toll appears lower than the 400 initially claimed by Taliban officials, it is by far the deadliest attack since a conflict between the two countries ramped up last month. Christopher Clary of the University at Albany says the initial evidence suggests there were “very legiti- mate military targets” close to the hospital but that Pakistan’s systems for preventing civilian casualties clearly failed. The reason for war is Pakistan’s claim that its neighbour is sponsoring terrorist attacks on its soil through a proxy, the Teh- reek-e-Taliban Pakistan (TTP). Pakistan, which has complete air superiority and backing from America, seems unwilling to halt its bombing campaign until it has ex- tracted concessions from the government in Kabul, such as steps to disarm or neu- tralise the TTP. The Taliban, for its part, has launched border raids and drone at- tacks on Pakistani cities. The conflict could now escalate. The Taliban had looked divided over how to handle tensions with Pakistan. But “it will be very hard to publicly come to the table after such a devastating civilian attack,” says Avinash Paliwal of the School of Ori- ental and African Studies in London. Mil- itant factions could respond by sponsoring a more spectacular attack in Pakistan. Yet it remains just about possible that the war in Iran gives both sides reason to step back. Afghanistan relies on Iran for food, energy and building materials, all of which have been disrupted. Pakistan is among the countries most exposed to the energy shock arising from Iran’s closure of the Strait of Hormuz. On March 18th Paki- stan announced a five-day pause in opera- tions, to mark the end of Ramadan. Opti- mists are hoping that one war in the neigh- bourhood might help contain another. ■ DELHI AND ISLAMABAD A deadly strike in Kabul could have big knock-on effects C002 -- 30 of 78 -- C002 -- 31 of 78 -- 33 The Economist March 21st 2026 China Powering AI Cake, robots and electrons ARTIfiCIAL INTELLIGENCE is like a cake, says Jensen Huang, the boss of Nvidia, a chipmaker. AI applications, such as chatbots, are at the top. The next layer down is software, like the large language models (LLMs) on which chatbots run. Then comes hardware, the semiconduc- tors needed to train the models. This spring China’s AI firms are busy baking all of these layers. ByteDance, the company behind TikTok, has unveiled a slick new video-generation app. DeepSeek, a flashy startup, is due to release a powerful new LLM. And Huawei, China’s tech champion, will unveil a new AI chip. Though these firms keep China in the AI race with America, they are not pushing it into the lead. But there is another layer of Mr Huang’s cake (see Business section) that goes underneath all the others, and that is energy. Semiconductors require vast amounts of it to run the trillions of calcula- tions behind the AI models. And China’s electrical grid has far more cheap power than the West. This disparity is known as the electron gap. Can China use it to achieve AI supremacy? American companies seem spooked at the prospect. Sam Altman, the boss of OpenAI, has predicted the cost of AI will “eventually converge with the cost of ener- gy”. In October his firm warned that Chi- na’s power advantage could “put US leader- ship [in AI] at risk”. The following month Mr Huang predicted that China “will win the AI race” for the same reason. In January Elon Musk, who owns xAI, another AI company, said that “based on current trends, China will far exceed the rest of the world in AI compute” because of its grid. AI companies are increasingly worried about access to energy. They are building ever bigger and more power-hungry data centres to support smarter models. Some are now at the gigawatt (GW) scale: equiv- alent to the power capacity of a nuclear- power station. Global demand to power such data centres could surge to 68GW by 2027 and 327GW by 2030, say researchers at RAND, an American think-tank. America’s ageing grid is already strug- gling to keep up. There is a huge backlog of data centres waiting to be connected. Firms are also wrestling with local opposi- tion because data centres can push up power prices for residential users. Some are building off-grid generators. Others suggest ideas like building data centres in space rather than doing so in America. “Many AI projects are now constrained not by chip supply but by…whether enough re- liable electricity can reach the building,” says one person at a semiconductor firm. China has no such worries. Its power grid, the world’s largest, is still growing at a blistering pace thanks to massive state in- vestment. It added over 500GW of capacity just last year, to reach a total capacity of Is cheap energy the key to China gaining AI supremacy? → ALSO IN THIS SECTION 34 Opinions of America 35 Still fighting air pollution 36 Chaguan: China’s self-reliance ⏩ C002 -- 32 of 78 -- 34 The Economist March 21st 2026 China ▸ ⏩ 3,800GW, more than double that of Amer- ica’s. Over the next five years China is set to add six times as much capacity as its ri- val. A bonanza of wind and solar projects is driving growth. And half of the world’s nu- clear-power plants are also under construc- tion in China, while the country is still building lots of coal-fired power. Chinese data centres can secure power for around three cents per kilowatt-hour, according to official figures, around half the rate many American ones pay. And because the gov- ernment sets residential power prices sep- arately, there is little risk of public opposi- tion to power-hungry infrastructure. Still, for all the panic about an electron gap, China is not yet exploiting it. A big reason is a shortage of chips. Since 2019 tightening American export restrictions have made it harder for Chinese firms to buy or build the advanced chips (those with feature sizes of seven nanometres [nm] or less) that power the latest models. Last year China’s tech firms were estimat- ed to have spent $24bn on AI infrastruc- ture, such as data centres; American ones spent over $350bn. Investments in data centres by China’s local governments have been mismanaged, leading to many get- ting built to low standards. Some reported- ly have utilisation rates as low as 20%. Pork and chips As a result, China’s computing infrastruc- ture is far weaker than its energy abun- dance could allow. Take Yanggao, a dusty spot in the northern province of Shanxi. Local officials claim it has become a “com- puting county”. A giant data centre has sprung up on the site of a former pig farm. It enjoys cheap power from wind farms, so- lar panels and a coal-fired power station; a cold climate to aid cooling; and a river to supply water. State-run media have parad- ed it as part of an “AI wave” sweeping the province. But less than 0.1% of its chips are capable of the intense calculations needed to train AIs, according to a manager there. There are signs that China will soon start leveraging its energy advantage. On March 5th Li Qiang, the prime minister, mentioned “hyperscale computing” (ie, giant data centres) for the first time in his annual state-of-the-nation address, pro- mising to “launch new infrastructure pro- jects co-ordinating computing capacity and electricity supply” this year. Chinese hyperscalers, meanwhile, are ramping up investment. Ken Liu, an analyst at UBS, a bank, expects China to build another 25GW of AI data centres by 2029, having built just 5GW over the past two years. A build-out at that speed, notes Mr Liu, will depend on China manufacturing many more high-end chips domestically. Years of efforts to that end are bearing fruit. Hua- wei’s homegrown 7nm AI chips are still less powerful than American offerings, but they can close the performance gap when lots are stacked together. That consumes more energy, but it matters less when elec- tricity is cheap. This year China’s leading foundry, Semiconductor Manufacturing International Corporation, which makes most of Huawei’s 7nm chips, plans to dou- ble its capacity for making them. In March, Reuters news agency reported that Hua Hong, another Chinese foundry, was also starting to make 7nm chips. Officials are encouraging data centres in the western provinces that have plenty of wind, solar and hydropower (and cooler average temperatures). By 2028, China hopes to connect all these data centres into a single pool that can provide cheap computing resources nationwide. Such ef- forts should allow China’s power advan- tage to more than make up for its weakness in chips by the late 2020s, reckons Lin Bo- qiang, of the China Institute for Energy Policy Studies at Xiamen University. “All we have to do is keep building,” he says. At the moment, China’s leaders are mainly focused on AI deployment: trying to push AI tools into the broader economy to make it more productive. Officials are especially excited about applying AI to the physical world through such things as self- driving vehicles, robots and smart fac- tories. Abundant energy, and hence cheap- er AI models, should help as companies will be more likely to actually use them. For American tech bosses like Mr Alt- man the electron gap is more worrying in relation to the idea of artificial general in- telligence (AGI), an AI that can surpass the cognitive abilities of humans. An AGI might suck up far more power than even today’s cutting-edge AIs. Might China be the one to eventually develop it? Until re- cently China’s leaders have seemed wary of the idea, seeing it as more of a risk than an opportunity. But in October Alibaba be- came the first big Chinese firm to an- nounce it was pursuing AGI. And in March China released its new five-year plan, for the period to 2030. It included a call to “ex- plore development paths for AGI”. ■ Plugging in Electricity generation, ’000 TWh Sources: Our World in Data; Wind; EIA 10 8 6 4 2 0 25 20 15 10 05 2000 95 90 1985 US EU Russia Japan India India China Public opinion A hawkish turn CHINA IS HAVING a moment in West- ern public opinion. Communist Party mouthpieces crow that the country is increasingly “cool”. Young Westerners on social media are “Chinamaxxing”: adopt- ing Chinese habits like drinking hot water (not cold), or Tsingtao beer. Polls suggest that views of China, especially among the young, are growing more favourable. A report released on March 9th sug- gests the feeling is not mutual. Chinese opinion polls rarely ask about sensitive is- sues. But unusually, across three surveys in 2024-25, the Carter Centre, an American think-tank, was able to ask 6,500 Chinese people for their views on international af- fairs. The results suggest that China’s pop- ulation sees the world in increasingly stark terms. Fewer Chinese now oppose using military force to unify China and Taiwan. President Donald Trump’s aggressive for- eign policy appears to have dented views of America and stiffened Chinese resolve. The survey also shows that opinion diverg- es from state narratives in some key areas. Two years ago more than half of Chi- nese opposed unifying China and Taiwan by military force. By late 2025, that figure had fallen to 38%. Support for forced unifi- cation, under at least some circumstances, had risen from 25% in 2024 to almost half. Importantly, of all their neighbours, Chi- nese feel most warmly about Taiwan—in line with state narratives that the Taiwan- ese are “family”. A minority see Taiwan’s computer-chip business as an important reason for unification. A series of events last year, including a big arms deal struck by America and Taiwan and comments by the Japanese prime minister, probably con- tributed to the rising hawkishness, bolster- ing President Xi Jinping’s stance. Mr Xi can also count on support for his tit-for-tat approach to relations with Mr Trump. Almost three-quarters of respon- dents regarded America as a national-se- curity threat. Some 62% of people backed retaliation against America’s trade war, for instance by cutting off rare-earths exports, even if it is costly to China. Only 4% sup- ported negotiating over export controls on chips. In 2024 views on America were more evenly split. In the past, the public saw am- ity with America as vital to China’s eco- nomic success. Now, however, they “are demanding a relationship of equals”, says Nick Zeller, one of the survey’s authors. Public opinion in China is remarkably Public opinion in China is hardening on America and Taiwan C002 -- 33 of 78 -- 35 The Economist March 21st 2026 China ▸ unified, thanks in part to the consistency of the state narratives that help shape it. But one characteristic appears to predict a respondent’s views better than others: in- come. High earners tend to view America, including its culture, more favourably than does the population at large, the poll sug- gests. But the well-off are also more stri- dent about Chinese power: they think more highly of Russia, and are more open to a military solution to Taiwan. The gov- ernment has previously suppressed polling that showed that the rich had views out of step with the rest of the country. Still, the population appears to be at odds with the dominant state narratives on some issues, notes Yawei Liu, another sur- vey author. Despite support for trade with Russia, some 44% of Chinese oppose send- ing troops to support its war in Ukraine, a limit on the countries’ “no-limits partner- ship”. China calls its territorial claims in the South China Sea “indisputable”, but al- most half the population would support giving up some claims in return for Amer- ica reducing its security presence in Asia. And contrary to state-media love-ins, the population has a remarkably low opinion of Cambodia, a diplomatic pal, thanks to its rampant scam industry. Popular support at home can be useful to the government when it wants to signal its resolve abroad. But opinion in China tends to be elastic and responsive to state narratives. That is partly because the state can be persuasive, and partly because sur- vey respondents know what the govern- ment wants to hear. ■ Fighting pollution Clearing the skies, again IN THE 1990s and 2000s, as China’s econ- omy steamed ahead, concerns about pol- lution were ignored. Air quality was poor and smog blanketed cities. But in 2014, partly because of popular discontent, the leaders decided to act. The prime minister, Li Keqiang, declared a “war on pollution”. Since then China has made much progress. The sky over Beijing is often blue. Recently, however, the improvement has slowed. To calculate current pollution levels across the country, The Economist used data from the “China High Air Pollut- ants” dataset, created by Jing Wei of Pe- king University and others. The research- ers use satellite data to capture a map of pollutants 2.5 micrometres in size (PM2.5), which are the leading cause of disease from air pollution. We overlaid this map with another of population density in Chi- na to calculate weighted PM2.5. This em- phasises cities like Shanghai and ignores places like the Taklamakan Desert, which is swirling with dust plumes but unpopu- lated. Our results show that between 2013 and 2021, PM2.5 fell from 66 micrograms per cubic metre to 33, a rate of 4.2 a year (see chart). But between 2021 and 2024, that decline slowed to just 0.5 per year. There is no consensus as to why this slowdown has occurred, says Eric Zou of the University of Michigan. One explana- tion is that all the easy gains have been made. Before 2014, emissions treatment was inefficient. Many initial moves tried to stop pollutants from entering the air after they had been formed (so-called “end-of- pipe” measures), for instance by putting scrubbers in chimneys of power plants. These have run their course. Now comes the harder part: getting polluters to change their behaviour so the pollutants are not formed at all. Electrifying transport sys- tems falls into this category. There are also factors outside China’s control. Meteorological conditions affect PM2.5 levels a lot. In 2020 strong winds helped ventilate the air and heavy rainfall mopped up particles as they fell, reducing average PM2.5 levels, according to a study in Nature, a British journal. But the weather can act the other way, too. Climate change is making wildfires and sandstorms more frequent and also increasing occurrences of “atmospheric inversions”, which trap pollution at the ground level. In 2023, when dust storms struck northern China, PM2.5 readings jumped by over 30% in Beijing. The pressure to clean up has also eased. One survey of Beijingers in 2015 by re- searchers from Princeton University found that high pollution lowered local support for the government. But PM2.5 levels have now entered a “tolerable range” for many, says Yanzhong Huang of the Council on Foreign Relations, an American think- tank. Choking on smog is rare. For several years now China has met its national limit of 35 micrograms of PM2.5 per cubic metre, which it set in 2012. A decline in public clamour has led to local authorities soften- ing their line, so progress has stagnated. Now the standards are being tightened again. The limit for average PM2.5 will be lowered from 35 to 25 micrograms per cu- bic metre, said the Ministry of Ecology and Environment on February 24th. Initially, a “transitional” limit of 30 micrograms will apply, starting from March 1st. From 2031, the full limit will come into force. That is still well above the guideline set by the World Health Organisation (WHO), which in 2021 said that the level of PM2.5 should be no higher than 5 micrograms. Pollution in big cities remains much higher than those in the West (though London and New York do not meet the WHO’s strict criteria either, see chart). Air pollu- tion is still a big cause of death in China. In 2021, 2.3m people died because of PM2.5, making up 19% of all deaths in China, found a study in the Lancet, another British journal. As China’s population ages, it will become more vulnerable, so the harm from grimy air will only rise. But cutting pollution too fast would re- quire stringent regulation, which could cut into economic growth. At some point, “the damage on the economy becomes larger than the benefit of health improvement,” says Mr Zou. There is, therefore, a difficult balance to strike between the two. ■ Why China’s war on air pollution has slowed Still smokin' Ground-level PM₂̣ ₅ pollution, micrograms per cubic metre Sources: ChinaHighAirPollutants (CHAP) version 4; IQAir; WorldPop; The Economist 70 60 50 40 30 20 10 0 24 20 15 10 05 2000 China, population-density-weighted WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit ew (announced in Feb 2026) New (announced in Feb 2026) ew (announced in Feb 2026) New (announced in Feb 2026) ew (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) New (announced in Feb 2026) from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old ( Old (from 2012) Old (from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) Old (from 2012) China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: China annual limit: Chengdu Beijing Shanghai Guangzhou Berlin Tokyo Tokyo T Paris London New York 35 30 25 20 15 10 5 0 Selected cities, 2024 WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit WHO annual limit C002 -- 34 of 78 -- 36 The Economist March 21st 2026 China Surviving an energy crisis TO UNDERSTAND HOW China is weathering the energy shock from the Iran war, turn back five years to Xi Jinping’s visit to an ageing oilfield on China’s eastern coast. “We must hold the energy rice bowl firmly in our hands,” he said as he toured a drilling plat- form. His meaning was plain. Officials normally refer to control- ling the rice bowl as shorthand for China producing enough grain to feed itself. Mr Xi’s extension of the metaphor meant that China should seek self-sufficiency in energy, too. Easier said than done, especially for the world’s biggest im- porter of oil. But Mr Xi’s words came on top of decades of work to confront what the Communist Party sees as a major vulnerability: reliance on the fickle outside world for China’s essential needs. When peace prevails, an obsession with self-reliance can seem faintly paranoid. As Mr Xi is fond of telling his fellow cadres, “one must at all times maintain a sense of foreboding and a sense of cri- sis.” Yet one leader’s paranoia is another’s prudence. From Bei- jing’s vantage-point there is little doubt that the bombing of Iran and the resulting closure of the Strait of Hormuz, conduit for roughly a fifth of the world’s oil, illustrate the virtue of having a permanent sense of crisis. It is a philosophy that makes China well-prepared to cope with the Iranian fallout. The crisis also sheds light on what self-sufficiency actually means for China. Consider China’s exposure to Iranian oil and the Strait of Hor- muz. On the one hand, it stands to suffer. Iran exports more than 80% of its crude to China, accounting for roughly a tenth of Chi- na’s oil imports. Overall, about 40% of China’s oil imports come through the strait. On the other hand, Iran was always just one source of energy among many for China, and China also has other supply routes. Any loss is damaging but, by design, not crippling. For starters, China’s crude purchases are less geographically concentrated than those of many other big oil importers: it gets about half of its crude from the Middle East (not all via Hormuz), compared with 95% for Japan. It helps that China has no inhibi- tions, despite Western sanctions, about buying from Russia. In- deed, it is likely to purchase more from Russia now. China has also accumulated hefty reserves, enough to meet at least three months’ demand. Last year it sensibly stocked up when crude prices were low. But it has also shifted away from oil. Investing in renewables is often seen as an environmental policy, but the Iran crisis has highlighted China’s primary motivation: to lessen its external de- pendencies. At the same time it will not abandon coal when it has abundant supplies of the black rock, which is still used to supply more than 50% of its energy. Mr Xi has called this a “multi-wheel drive” solution to energy security. This gets to the heart of Chinese self-sufficiency, often mis- construed by observers. The idea is not that China should strive for total autarky, which would be costly even if it were possible. Rather, when it comes to things that truly matter, China believes it must trust only itself. If it can make what it needs, that is best. If not, it must manage its vulnerabilities. Food, the most existential of needs, proves this point. In the 1990s China aimed for self-suffi- ciency in a range of products including soyabeans and potatoes. But in the 2010s, it bowed to its farming constraints and declared that it would seek “absolute security” only for wheat and rice. For everything else, China cultivates a mix of diverse global suppliers, domestic reserves and alternatives—the exact template now being applied to energy. Self-reliance is a concept that many diplomats and business ex- ecutives now associate with Mr Xi, as if he has dusted off the old Maoist manual to steer China through tumultuous times. Certain- ly, he has striven to get China to break free from Western technol- ogy, above all by pouring vast sums into the semiconductor indus- try. But Mr Xi is far from alone among China’s post-Mao leaders. Deng Xiaoping, Jiang Zemin and Hu Jintao all crafted strategies for China to acquire the know-how and resources to stand on its own feet. That Mr Xi can unabashedly talk of grasping the “energy rice bowl” is a credit to these efforts. You’ll always walk alone The pursuit of self-reliance can be costly and potentially ineffi- cient. Why construct oil pipelines from Myanmar or Russia when the stuff can be shipped so easily? Why develop semiconductor fabs when you can buy from chip foundries abroad? Because un- fettered access to foreign markets is never guaranteed—some- thing China is all too familiar with. A decade ago there were those in China, such as Zhang Wei- ying, a liberal economist, who railed against state-led industrial investments as wasteful. After a decade of fending off American sanctions and coping with disruptions to supply chains—first from covid-19 and now from the Iran war—such criticism has lost its bite. Indeed, many in the West have come around to the Com- munist Party’s way of seeing things. Corporate bosses in America and Europe may not be inclined to use terminology with autarkic undertones. But building redundancy into supply chains? That is a formulation they can get behind. The importance of self-reliance in China’s strategic thinking also helps explain why, when things go awry, it can seem distant from its partners. China values Iran as a supplier of energy, not an ideological soulmate, and the essence of its planning is that it must avoid over-exposure to any one supplier. In a true allied rela- tionship, the explicit goal is reliance: one country can count on the other in a pinch. Mutual reliance, however, also leads to mutual vulnerability, which is exactly what China wants to minimise. It can make for a cold and lonely world. But the Iran crisis will only harden the Communist Party’s convictions that China must be the master of its own rice bowl. ■ CHAGUAN For a self-reliant power like China, no supplier is ever irreplaceable C002 -- 35 of 78 -- 37 The Economist March 21st 2026 Middle East & Africa Aliko Dangote Meet Africa’s richest man “IT’S A CRAZY situation right now,” Ali- ko Dangote, Africa’s richest man, tells The Economist in an interview on March 12th in his office in Lagos, Nigeria’s com- mercial capital. He has returned after a few hours away to find that crude oil prices have surged by 10% because of the latest news from the Gulf. “And I think it will continue for a while,” he adds. African businessmen are often minor players at times of global crises. But the 68-year-old Mr Dangote is no ordinary businessman. In 2023, nearly a decade after it was first proposed, he opened Africa’s largest refinery complex on the edge of La- gos, an area nearly half the size of Manhat- tan. As it can process 650,000 barrels of oil per day, Mr Dangote’s phone does not stop ringing with offers from potential buyers. “People are ready to pay anything now,” he says, with only some exaggeration. The refinery is emblematic of Mr Dan- gote’s increasing wealth and power. It is by far the largest scheme owned by the Dan- gote Group, the conglomerate behind his estimated fortune of $28.5bn, an amount that makes him the only African among the world’s 100 richest people, according to Forbes. But Mr Dangote suggests that the refinery symbolises something more: the need for the continent to become more self-reliant. “If we Africans don’t lead in the industrialisation of Africa, Africa will never industrialise,” he argues. And though no one should confuse the tycoon with an altruist, he may just be right. Mr Dangote did not start out making things. Like many of his relatives (his great-grandfather was a wealthy merchant of nuts, among other products), he was a trader. From the 1970s onwards he import- ed soft commodities such as salt and sugar, then sold them in Nigeria. A leaked cable from the American government written in 2005 said that his wealth was “based on his family connections and political friend- ships” and that at one time or another he held exclusive import rights for cement, sugar and rice. Around the turn of the century, encour- aged by the president of the day, Mr Dan- gote shifted from importing cement to making it. Dangote Cement became the (concrete) foundation of his fortune. One of three Dangote subsidiaries listed on the Nigerian stock exchange (NGX), it has a market capitalisation of 13.6trn naira ($10bn). Its operating-profit margins can be more than twice as high as those of other cement multinationals, besting even competitors in frontier markets, where margins tend to be higher. Mr Dangote suggests this is evidence of efficiency. Critics say it shows he has bene- fited from governments’ tax breaks and im- port bans on the cement he once brought into the country, as well as a deliberate strategy to ramp up capacity so as to scare off potential competitors. The refinery complex is, though, on an- other scale entirely, both for him and for LAGOS The tycoon has ambitious plans in Nigeria and the rest of Africa → ALSO IN THIS SECTION 38 Congo’s war escalates out of sight 39 The future of east African media 40 Israel, Lebanon and Hizbullah ⏩ C002 -- 36 of 78 -- 38 The Economist March 21st 2026 Middle East & Africa ▸ ⏩ Africa. To build his industrial Xanadu Mr Dangote had to dredge a vast swamp and build a port to bring in the gigantic equip- ment. On a visit before the interview The Economist toured a maze of pipes and chutes, with the largest distillation tower taller than the clock tower holding Big Ben. The site’s nearly 200 fuel tanks are de- signed to store more than 4bn litres of fu- els, a larger volume than France produces of wine every year. “Actually we are build- ing a runway there,” says Mr Dangote later. “Nobody believes something like this ex- ists in Africa. We can fly in people to come and have a look,” he says. An indispensable conglomerate The refinery is a macroeconomic feat as well as an industrial one. Last year the IMF estimated that, if run at full capacity, it would increase Nigeria’s non-oil GDP by 1.5% between 2025 and 2026, while increas- ing official dollar reserves by $5.5bn annu- ally. For decades Nigeria, sub-Saharan Af- rica’s largest crude producer, has imported most of its petrol, which governments sub- sidised. Mr Dangote’s refinery, which can more than cover Nigeria’s domestic petrol consumption when running at full tilt, helps reduce demand for dollars and sup- ports the value of the local naira. “Nigeria would have been at a standstill now with- out the refinery,” Mr Dangote says. He disputes the idea that he is using his usual playbook with the refinery, taking advantage of tax breaks and import bans. Regulators say they are not issuing new import licences for petrol—in a move that would echo what happened with cement— but the Dangote Group says this is not the case in practice. There are vested interests in the status quo, made up of what he calls the oil mafia built around imports. The refinery’s use extends beyond ener- gy. It produces polypropylene for plastics and will soon add a key chemical for deter- gents. In a warehouse as big as an airport hangar, conveyor belts offload snowy piles of fertiliser onto lorries powered by gas from the refinery, headed for Mr Dangote’s purpose-built port. These are some of the 3m tonnes of fertiliser it can produce per year, more than any other plant in Africa. The de facto closure because of Iranian at- tacks of the Strait of Hormuz, the Gulf channel through which a third of the world’s seaborne fertiliser trade passes, only affirms Mr Dangote’s importance. What does Mr Dangote have planned for his next trick? He wants to list a portion of the refinery on the NGX (and perhaps in London, too, though a plan to do the same for the cement business never material- ised) and over the next three years expand capacity to almost half as much as all of Saudi Arabia’s facilities combined. He also wants to use the gas produced at the com- plex to provide power for manufacturers that could set up nearby. The Dangote Group has plans beyond Nigeria; it already operates in 16 other Af- rican countries. Last year it announced a $2.5bn joint venture with Ethiopia to build a fertiliser plant of similar size to the one in Nigeria. Mr Dangote says he will invest an- other $1bn in cement and power projects in Zimbabwe. He lists other ideas: potash and phosphate mining, copper processing in Zambia, cocoa processing in Ghana and Ivory Coast, and a petroleum pipeline from Namibia to central Africa. “We know that if we don’t invest, there’s nobody that will come and invest in our continent,” argues Mr Dangote. Who led investment into East Asia, he asks rhe- torically. “It wasn’t the Europeans. It was led by themselves as Asians.” And the in- dustrialists investing in India? “They’re all Indians.” Indeed Mr Dangote’s refinery and continental ambitions have prompted comparisons to Mukesh Ambani, the rich- est man in India, whose conglomerate, Re- liance, runs the largest refinery in that country. “Watch this space. Aliko Dangote is about to become the Ambani of Africa,” argues Amit Jain of Nanyang Technologi- cal University in Singapore. For though Mr Dangote talks of the need for African businessmen to invest in Africa, he implies that most either cannot or will not. “I can’t see any African country today building a refinery, and if they tried, I wish them best of luck,” he says, reflect- ing on the huge effort it took him. “Afri- cans generally might not have this kind of capital. Even when they have, they don’t want to invest. They are scared about in- vesting. We are not.” Mr Dangote has 650,000 reasons a day why he is best placed to be Africa’s indus- trialist. No other tycoon has the balance- sheet, bolstered by the cement business, to fund such projects. None has his track re- cord. But it may be that Mr Dangote enjoys it that way. And whether it is best for the continent to have a single Ambani or Rockefeller, rather than a panoply of com- peting tycoons, is less clear. His companies also remain heavily de- pendent on foreign subcontractors for much of their technical, high-skilled pro- cesses, from construction to maintenance. Most of the refinery’s managers are Indi- ans. The cement business has a longstand- ing relationship with Sinoma, a large Chi- nese company. Mr Dangote brushes these criticisms away. “We are very, very innova- tive,” he argues, citing the heavily automat- ed refining and cement production. As he gets up to leave, a flurry of staff emerge seemingly from nowhere. There is another meeting to get to: more deals to be struck. “When you come back in three years’ time,” Mr Dangote offers as a part- ing thought, “what you’ve seen today, it will be three times that.” ■ War in eastern Congo Out of sight GUNMEN ARE everywhere on the main road through Fizi territory in South Kivu province in eastern Democratic Re- public of Congo. So are signs of devasta- tion. People fleeing their villages trudge past carrying their meagre belongings. Every so often, the remains of a burnt-out hamlet appear at the side of the road. More than a year ago M23, a militia backed by Rwanda, captured Goma and Bukavu, eastern Congo’s largest cities. A peace deal backed by America and signed in December by Félix Tshisekedi and Paul Kagame, the presidents of Congo and Rwanda, was supposed to end the conflict. But more than three months on, the fight- ing is spreading to ever more remote areas, inflaming ethnic tensions and raising con- cerns that it may affect Katanga, Congo’s industrial centre (see map). Early in the year it briefly looked as though the region might get some respite. In January M23 left the city of Uvira, which it had taken just days after the peace deal was signed. That was a “gesture of good faith”, says the group. The real reason was probably pressure from America, perhaps backed by mercenaries linked to Erik Prince, a notorious military contractor. Yet the withdrawal from Uvira has done little to dampen the conflict in South Ki- vu’s mountainous back country, where fighting has escalated. After Willy Ngoma, M23’s military spokesman, was killed in a FIZI Despite a peace deal, fighting is worsening in ever more remote areas 100 km Kigali Bukavu Lake Tanganyika Lake Tanganyika Lake Tanganyika Lake Tanganyika Kalemie Kalemie Kalemie Kalemie Kalemie Kalemie Uvira Uvira Uvira Uvira Uvira Uvira UUvira UUUvira Uvira Uvira vira vira Uvira vira vira Uvira vira vira Uvira vira vira Uvira vira vira Uvira vira vira Uvira vira vira Uvira vira Uvira Uvira Uvira Uvira Uvira Lake Victoria TANZANIA UGANDA BURUNDI South Kivu Maniema Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Fizi Tanganyika Tanganyika T Katanga 150 km ↓ North Kivu Goma . R. CONGO . R. CONGO D. R. CONGO D. R. CONGO DD. R. CONGO D. R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO . R. CONGO D. R. CONGO . R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO D. R. CONGO RWANDA Source: AEI’s Critical Threats Project Area of operations March 11th 2026 M23 militia M23-aligned militia C002 -- 37 of 78 -- 39 The Economist March 21st 2026 Middle East & Africa ▸ drone strike near the mining town of Ru- baya in North Kivu in February, the group’s allies in the south intensified their offen- sive against the Congolese army and mili- tias allied with it. Whoever ends up in con- trol of the area will have leverage over the towns on Lake Tanganyika and the road south towards Congo’s mining heartland. The escalation is a catastrophe for the territory’s civilians, half a million of whom have been displaced since December. There is no electricity and hardly any medicine. Clean water is scarce. Supplies must be transported via roads that turn into knee-deep slush in the rain. Villages that struggle to secure basics, such as para- cetamol, are taking in thousands of refu- gees. Even before Ngoma’s assassination, the International Committee of the Red Cross said war-wounded patients were overwhelming Fizi’s colonial-era hospital. The conflict is reviving ethnic tensions in the region. Many locals perceive South Kivu’s Tutsis, known as the Banyamulenge, as a Rwandan transplant. Animosity has its roots in atrocities committed by Banyamu- lenge militias during the first and second Congo wars of the late 1990s and early 2000s. At the time, Rwanda backed the groups to help it fight Hutu génocidaires who had fled to Congo after the genocide of Rwanda’s Tutsis. That dynamic is now playing out again. The largest Banyamulenge militia, which has its stronghold in the South Kivu high- lands, officially joined forces with M23 just over a year ago. Most pro-government fighters say their war is against the Banya- mulenge. “Our wives are widows and our children are orphans,” says one. “We won’t be able to live together again.” Things may yet get worse. There are fears M23 could march towards Kalemie, some 260km south. That would give the group control of the city’s airport, which can be used by the army to supply troops and fly drone sorties. It would also bring the conflict uncomfortably close to the Ka- tanga region, where the Trump administra- tion wants American firms to invest in lu- crative copper and cobalt mines. Nor is the danger of escalation limited to South Kivu. Last week a drone attack in Goma killed a French aid worker. That suggests the army is stepping up its campaign against M23 in the north, which may invite retaliation. Efforts to get both sides to stick to the ceasefire have gone nowhere. An Angolan- brokered initiative to resume talks fizzled out in February. In early March America imposed new sanctions on Rwandan offi- cials and on the country’s armed forces. Rwanda complained it was being unfairly targeted. Fighting continued unabated. “We’ve left everything behind, and we’re tired,” says Petro Mujambo, a displaced farmer on the road through Fizi. Plenty of Congolese are likely to share his view. ■ KENYA’S PRESS has long been known for its independence. Even before multiparty democracy was restored in the 1990s, the Guardian, a British daily, declared it (perhaps a bit breathlessly) sub-Saharan Africa’s “only truly free press”. Recently, its leading titles have been especially critical of William Ruto, Kenya’s president. Last year one pro- nounced his government a “Rogue Re- gime” on its front page. Now the press in Kenya, and across east Africa, face a shake-up. On March 10th Rostam Aziz, an industrialist and former ruling-party MP from Tanzania, bought a controlling stake in the Kenya- based Nation Media Group, one of Africa’s largest media empires and a font of relatively independent journalism since its founding in 1959. Mr Aziz, who describes himself to The Economist as a “great believer in print media”, promises to safeguard the group’s editorial in- dependence while transforming the company for the future. Can he deliver? It will not be easy. The Nation group, which owns dozens of newspapers, TV stations and radio outlets in the region, reported pre-tax losses and declining revenue in 2023 and 2024 (the latest year for which there is data). Young Kenyans increasingly get their news from social networks such as YouTube and TikTok. Mr Aziz says he will invest millions of dollars in the group. Caving to political pressure from governments would be an act of commercial self-harm, he says: “I don’t think a newspaper can survive if it is not credible, reliable and fair.” The Aga Khan, the late leader of Ismaili Muslims and the Nation group’s former owner, was renowned for his skill in keeping politicians “off his back”, notes George Nyabuga of the Aga Khan University in Kenya. But this became increasingly tricky after Mr Ruto took office in 2022 and began pushing back against the Nation’s investigations into corruption. “Every day we have requests from State House to take something down,” says a senior company insider. (Mr Ruto has claimed that his government criticises the press only to ensure they are not “biased”.) In Uganda, Nation reporters were barred from covering President Yoweri Museve- ni’s events during his re-election cam- paign last year. The Committee to Protect Journal- ists, a watchdog, recommends that to allay concerns Mr Aziz introduce bind- ing editorial charters, among other re- forms. Yet critics worry that his other business interests in east Africa may depend on warm relations with increas- ingly autocratic governments, prompting him to pull his punches. “Give him the benefit of the doubt and measure him on what he does,” says another company insider. “But it’s a tall order.” Press freedom in Africa Rocking the Nation NAIROBI Can the new owner of east Africa’s spikiest media group preserve its spirit? C002 -- 38 of 78 -- 40 The Economist March 21st 2026 Middle East & Africa Israel and Hizbullah The battle for Lebanon TO THE LEBANESE it is distressingly fa- miliar. Their country is once again un- der attack from Israel. In response to mis- siles and drones fired by Hizbullah, a Shia militia, in support of its long-time backer, Iran, Israel has launched a massive on- slaught on southern Lebanon and the cap- ital, Beirut. Since March 2nd Israeli strikes have killed more than 950 people, among them over a hundred children. Israeli evac- uation orders cover more than 14% of Leba- non’s territory. More than one million Leb- anese, a fifth of the population, have been displaced, many for the second or third time in barely two years. Families who scrambled back to the ruins of the south after a ceasefire between Israel and Hiz- bullah in November 2024 are sleeping in cars on Beirut’s corniche or in its streets. Things could get still worse. On March 16th Israel Katz, Israel’s defence minister, announced that the Israel Defence Forces (IDF) had begun a “ground manoeuvre” against Hizbullah in Lebanon “to remove threats and protect [Israel’s] residents in the Galilee.” Touring the border in early March, Israel’s far-right finance minister, Bezalel Smotrich, posted a video promis- ing that Dahiyeh, Beirut’s densely populat- ed southern suburb, would soon look “like Khan Younis” in Gaza. On March 18th the IDF destroyed some bridges over the Litani river, suggesting it may be preparing for a longer occupation. Israel is not yet committed to a ground offensive, however. So far, the IDF is oper- ating only a few miles beyond the border. It has set up forward positions in a fairly nar- row strip of land and carried out raids in deserted villages to find and destroy what it claims are hidden Hizbullah weapons stores and to prevent Hizbullah attacking Israel’s border communities. A deeper Israeli invasion and occupa- tion could push Lebanon into crisis. The mass displacement, overwhelmingly of Shias from the south, is reopening Leba- non’s sectarian fault-lines. In some Chris- tian areas local authorities are telling Shias to stay away, and landlords refuse to rent to them. As more are displaced the strain on an already fragile political order increases. Israel would also pay a heavy price for yet another war in Lebanon. Many thou- sands of reservists would have to be called up. Israel has now been on a war footing for almost two and a half years. The IDF is anx- ious to avoid another major conflict while the war in Iran continues. Israel’s dilemma is stark. Hizbullah is still weak. It is a long way off restoring its military, political and organisational pow- er. Its only patron, Iran, is under withering American and Israeli attacks. Israel reck- ons this is its best chance to destroy it. But air strikes and a limited ground of- fensive will not do that. In the 15 months since the ceasefire, hundreds of Iranian op- eratives have taken direct control of Hiz- bullah’s ground operations and the group’s efforts to rebuild itself. They have re- stocked weapons caches and decentralised command structures. For Israel to elimi- nate Hizbullah’s forces in southern Leba- non, even temporarily, would require a pro- longed ground campaign, tying up much of the IDF’s standing and reserve forces, for months at least. Make matters worse? An invasion also risks boosting Hizbullah. Lebanon’s Shias were starting to drift away. Support had ebbed after the militia drew Israel’s wrath in 2024 and then failed to repair the resulting damage. Those who know Hizbullah say it longs to confront Is- raeli soldiers on its own turf. A prolonged war or occupation would allow the group to reposition itself as a resistance move- ment fighting on behalf of all Lebanese. All this comes as Lebanon’s own lead- ers are at last beginning to confront the militia that has functioned as a state within a state for so long. For years the country’s politicians and army have found reasons to avoid that. They have blamed a lack of re- sources and firepower and pointed to the risk of internal fragmentation (around a third of Lebanon’s official army are Shias). Many fear that such action would prompt Hizbullah to return to the assassinations and kidnappings it used in the past. Lebanon’s government has gone fur- ther than ever seemed possible. In the week since Hizbullah pulled Lebanon into the war, it has declared the group’s military activities illegal and arrested dozens of its members for carrying weapons. The sup- port for the ban by Nabih Berri, parlia- ment’s speaker, himself a Shia, shows how far Lebanon’s politics has shifted. It has also offered direct talks with Israel, previ- ously unthinkable (contact with Israel or Israelis is still a crime in Lebanon). Israel’s leaders are still hesitating over whether to go in more forcefully. But they will not hesitate for ever. French and Amer- ican diplomats have been trying to broker an Israeli-Lebanese agreement that would give Beirut more time to disarm Hizbullah; Israeli generals are sceptical about the ca- pacity of Lebanon’s army to do so. Success is not guaranteed. But even if doing something might be bad, argues Aram Nerguizian, an expert on the army, “doing nothing is much, much worse.” The longer the state hesitates, the closer the country drifts towards collapse. The dilemma is clear: either Lebanon’s army takes on Hizbullah or Israel will. “It’s a turning point in 50 years of struggle,” says Sami Gemayel, head of Kataeb, a Christian party. “No one will allow Hizbul- lah to get out of this alive.” But, he adds bleakly, “will it be at the cost of destroying Lebanon or not?” ■ BEIRUT AND JERUSALEM Israel contemplates a ground invasion to finish off Hizbullah Beirut, battered C002 -- 39 of 78 -- 41 The Economist March 21st 2026 Europe European energy Burnout GERMANY’S SHARE of the North Sea re- sembles the head of a seagull. At just 41,000 square kilometres it is about 5% the size of Britain’s. Germany plans to squeeze 70 GW-worth of wind turbines into this small area by 2045, but it is running into an unusual problem: that many turbines would slow down the wind and reduce the electricity harvest by 37%. It is a tale of Europe’s limited energy potential, and the hazards of trying to find national solutions to a European problem. The war in Iran and the closure of the Strait of Hormuz are highlighting Europe’s energy shortage. Natural-gas prices in Europe have climbed back above €50 ($58) per MWh; in America, the cost is about $11. Combined with higher petrol prices, that could trigger a new bout of inflation. At a European Council summit starting on March 19th, as The Economist went to press, leaders were due to debate what les- sons to apply from the previous price jump in 2022, when Russia, Europe’s main gas supplier at the time, invaded Ukraine. Ursula von der Leyen, the head of the European Commission, wrote to country leaders ahead of the meeting that Europe had spent an additional €6bn on fossil fuel imports since the start of March, “the price we pay for our dependency”. Some want to go back to old ways. Bart De Wever, Bel- gium’s prime minister, said on March 15th that the European Union needed to “nor- malise relations with Russia and regain ac- cess to cheap energy”. Other leaders quick- ly rebuffed him. But they agree that Europe’s energy system is too expensive. The immediate concern is to contain price increases. Inflation has fallen from its peak of 11% in 2022 to about 2% in most of the EU. A prolonged war could raise it to 4% or more, according to estimates by Ox- ford Economics, a research firm. That could eat into real pay, which has just reco- vered from the previous shock. Some governments have already started to intervene. In Austria petrol stations are now allowed to raise prices only three times a week, and Germany is mulling a similar approach. TotalEnergie, a French oil and gas firm, has frozen the price at its stations in France until the end of the month. Windfall taxes on excess profits, which many countries implemented in 2022, are back on the table in Italy. Several countries are considering tax relief. The gas shock is particularly worrying for energy-intensive businesses. Metals, chemicals and other basic industrial sec- tors are still large in Europe, especially in Germany. In its basic chemicals sector, en- ergy costs made up 42% of value added in 2023, up from 28% in 2021, due to higher gas prices. Competition is fierce from Chi- na, where a price index for chemicals fell by 36% over the past three years. It could be risky for Europe to give up making basic chemicals, as the loss of rare-earths refin- ing to China has demonstrated. The Iran war is forcing Europe to confront its energy problem → ALSO IN THIS SECTION 42 Russia and the Iran war 43 Hungary’s baby bonuses 43 Reviving Irish 44 Charlemagne: Lovers' tiff ⏩ C002 -- 40 of 78 -- 42 The Economist March 21st 2026 Europe ▸ ⏩ Policymakers are considering various options to lower prices. The first is chang- ing how the electricity market works. Un- der the current set-up, the last power plant needed to meet demand sets the price. In Italy, a critic of the system, gas-fired plants set the price in 89% of hours so far in 2026, calculates Ember, a think-tank. In Spain it was 15%. So far in March Italy’s average power price was €142 per MWh, whereas in Spain it was €59. But the debate is unlikely to lead to ma- jor reforms of the market-based system. Nor should it. Energy experts mostly agree that the varying prices send crucial signals when power is dear, rewarding generators who produce at that time and creating strong incentives to invest in more capac- ity. Changing the basics of the market would create costly uncertainty among in- vestors. Indeed, Spain’s success is an ex- ample of the market working: it built more renewables and diversified its sources of electricity, lowering the price. The main issue in Europe is ballooning system costs, including the cost of improv- ing the grid. These already make up around 20% of household bills. “We are transforming the system from variable fuel costs to largely fixed costs,” says Christoph Maurer of Consentec, a consultancy. To make the renewables-based system work, the EU must invest €1.4trn in its grid infra- structure by 2040, according to its own es- timates. Every player, including consumers and industries, is trying to shunt the cost onto someone else, Mr Maurer says. The shift also requires connecting dif- ferent parts of Europe’s grid, so that peaks in demand and gaps in generation can be balanced across borders. A recent study shows that this could save about 500GW of costly backup capacity for when renewable sources produce little. But the commis- sion’s proposed grid package from Decem- ber 2025, which suggested more central- ised planning, is facing opposition from countries less dependent on gas that are reluctant to share—France with its nuclear power, Sweden with its hydropower. The final controversial issue is Europe’s emissions trading system (ETS), which puts a price on carbon. It is under fire from countries desperate to lower energy costs. The carbon price, currently about €66 per tonne, adds about €25 to the price of a gas- powered MWh. Giorgia Meloni, Italy’s prime minister, has called for suspending the system while geopolitical tensions pre- vail. Even Friedrich Merz, the German chancellor, has mulled changing it to ac- commodate industry. After eight coun- tries, Spain among them, sent the commis- sion a strongly worded letter defending the ETS, it will probably prevail. But its sys- tem of allocating free emission permits to energy-intensive industries, which had been scheduled to be phased out by 2034, could instead be extended. Europe will have to learn to live with higher energy costs. But there are ways to reduce them without slowing down the North Sea winds. ■ It pays to have options Daily wholesale electricity prices, 2026, € per MWh Source: Ember 180 150 120 90 60 30 0 March February Germany Italy France Spain US-Israeli air strikes on Iran begin Russia and the Iran war Sugar high BETWEEN FEBRUARY 22nd and 26th the Sarah, a tanker flagged in Hong Kong, turned off its transponders to pick up Rus- sian oil from smaller ships off Oman. It then headed towards Singapore, where it probably planned to pass on the cargo to another “shadow” ship. But on March 6th, after America issued a 30-day waiver allow- ing Indian refiners to buy Russian crude, the Sarah changed course for India. The ship’s U-turn symbolises the rever- sal of fortune for Russia’s energy industry since the start of the Iran war. The closure of the Strait of Hormuz has trapped some 15% of the world’s oil output in the Gulf. In December Brent crude, the global oil-price benchmark, touched a five-year low of $59 a barrel; now it hovers around $100. That makes Russian barrels harder to shun. The reprieve is a godsend for Vladimir Putin. Before the war it seemed as though Russia’s oil revenues and economy were sinking. Many refiners in India and China, its biggest customers, stopped buying in November, before American sanctions on Rosneft and Lukoil, its two largest produc- ers, came into force. The Kremlin’s oil-and- gas revenues were 44% less than a year ago. In two months its budget deficit hit nine- tenths of the target for all of 2026. Now Brent is back to where it was just after Russia invaded Ukraine. Should Hor- muz stay closed, Russia could reap another 2022-style windfall—enough to make up for the $300bn in central-bank reserves frozen by the West, reckons Robin Brooks of the Brookings Institution, a think-tank. The most immediate benefit is the chance to clear the shipment backlog at sea. India has increased purchases by half, helping cut Russia’s inventory on water by over 10%. China’s imports have also risen. This helps traders rather than Russia’s fi- nances, as the shipments have already been sold. But the Trump administration seems likely to adopt a permissive attitude to new barrels, too. That would mean high- er prices for Russia’s wares, degraded Western sanctions and potential Chinese backing for new projects. Take prices first. The absence of Gulf oil has triggered a dash for alternative crude. Russia’s is similar in quality to most Middle Eastern oil, and thus easy to pro- cess for Asian refiners. Urals crude deli- vered to India, once severely discounted, is now priced at a premium to Brent. Sergey Vakulenko, formerly of Gaz- prom Neft, a Russian oil firm, estimates that every $10 increase in the Brent price over a month boosts Russia’s energy ex- ports by $2.8bn, some $1.6bn of which goes to the Kremlin. Higher gas prices add a little pocket change, though piped ex- ports are well below 2022 volumes. That will help pad Russia’s budget for 2026, which assumed oil prices of $59 a barrel. The energy crisis is meanwhile making it harder for Western countries to tighten sanctions. Before it, the Trump administra- tion had seemed willing to impose “sec- ondary tariffs” on Russia and pursue its shadow fleet. With the latest easing Amer- ica’s credibility is weakened, says Rachel Ziemba of the Centre for a New American Security, another think-tank. The Euro- pean Commission had proposed a full ban on maritime services for Russian oil ex- ports, meant to be co-ordinated with America. That sanctions package, opposed by Hungary and Slovakia, now looks less likely to pass. A gas crunch may convince European countries to renege on commit- ments to stop buying Russian LNG. The war in the Gulf is also worrying China, which usually gets one-third of its LNG from the region. That may bring it closer still to Russia. The country holds vast reserves of crude, but its gas stock- piles cover only 40 days. That makes overland gas-supply op- tions attractive—and Russia offers one. In recent years the Kremlin has lobbied hard for China to back Power of Siberia 2, a 2,600km pipeline. The two governments signed a memorandum of understanding last year, but negotiations have stalled as China has played hardball. It is possible China will now offer a slightly better price. Russia’s remarkable turn of fortune may yet prove to be a “sugar high” that Surging oil prices give Vladimir Putin a big boost C002 -- 41 of 78 -- 43 The Economist March 21st 2026 Europe ▸ Hungary’s pro-natalism Yeah, baby ZILIA MESZAROS, a mother of three, was waiting at a Budapest primary school for her eight-year-old daughter to finish after-school football. It was a scene to warm the heart of Viktor Orban, Hunga- ry’s prime minister. The country’s popula- tion has fallen from 10.7m in 1980 to 9.5m today, and increasing the birth rate is cen- tral to Mr Orban’s ideology. Nothing gov- ernments do makes sense, he said last month, “if there is no one to inherit it”. Without migration, a country needs a fertility rate of about 2.1 to maintain its population. When Mr Orban came to pow- er in 2010, Hungary’s was just 1.25, but by 2021 it had climbed to 1.61. Fidesz, his par- ty, touted this as proof that their pro-natal- ist policies were working. Yet by 2025 the rate had fallen back to 1.31, with just 72,000 babies born, the fewest on record. Hungary spends an extraordinary 5.5% of GDP on child-support measures, and middle-class working mothers like Ms Meszaros are the prime targets. Mothers of three or more children pay no income tax, and that exemption is gradually being ex- tended to mothers of two. Parents can get interest-free loans and subsidised mort- gages. A childless woman earning 1m fo- rints ($2,940) a month takes home 665,000 forints after taxes; with three children, that rises to 963,500 forints. Ms Meszaros says these measures make a big difference to her budget. They let her afford private-sector health care, among other things. But they did not affect how many kids she decided to have: “I don’t think they encourage people to have more children, but I think they encourage you to work if you have children.” Indeed, Hungary’s fertility rate has fol- lowed a similar path to those of nearby Czech Republic and Slovakia, which spend much less on child support. Nevertheless, Mr Orban’s family policies are at the heart of his campaign in Hungary’s general elec- tion on April 12th. Polls show he is trailing the opposition Tisza party, led by Peter Magyar, by a solid margin. Peter Szitas of the Danube Institute, a conservative think-tank, says spending money on families is valuable regardless of how many extra children it leads to. Just as important, Hungary’s family policies and anti-immigrant ideology are essential to Mr Orban’s international appeal, particu- larly to American conservative populists. In Fidesz’s rhetoric, “family and Christian- ity are almost used as synonyms,” says Zsolt Enyedi, a political scientist at the Central European University. Pro-natalist policies send a message to the MAGA world, he says: “It is about changing soci- ety at the biological level, which is the most basic level you can imagine.” All European countries face demo- graphic challenges, but in Hungary they have especially strong historical echoes. Before the first world war Hungarians wor- ried that emigration would leave them fac- ing nemzethalal (national extinction) among more numerous Slavs and Ger- mans. Today immigrants, particularly Mus- lim ones, are the populist right’s bogey- men. Even should Mr Orban lose, his pro- natalist policies may continue: Tisza promises to spend yet more on them. ■ BUDAPEST Viktor Orban’s efforts to raise fertility are not working For love, not money Fertility rate, births per woman Sources: Haver Analytics; government statistics Replacement rate: 2.1 1.8 1.5 1.2 0.9 24 20 15 10 05 2000 95 1990 Poland Czech Rep. Hungary Slovakia ON THE WATERSIDE in Dun Laogh- aire, a Dublin suburb, a crowd gathers on a patchwork of yoga mats. Naoise Ni Bhroin, the instructor, calls for an anail isteach (inward breath). Her classes are mostly in Irish, long seen by many as a useless language, says Ms Ni Bhroin. But not any more. A century ago just 18% of the coun- try’s population spoke Irish. Yet today 1.8m people in Ireland (around 40% of the population) claim some ability to speak it. In Northern Ireland it has overtaken French as the number-two A-Level language after Spanish. Irish has become cool. Cillian Mur- phy and Paul Mescal, two actors, have used it at awards ceremonies. Irish- language film and music are winning global fame, from the Oscar-nominat- ed film “The Quiet Girl (An Cailin Ciuin)” to Kneecap, a hip-hop group. Irish-speaking influencers promote the language on social media. The revival owes as much to state policy as it does to pop culture. Cather- ine Connolly, Ireland’s president, wants to make it the official working language of her office. The govern- ment has set a 20% recruitment quota for Irish speakers in the public sector by 2030. Irish became a fully fledged official and working language in the European Union in 2022. This means growing demand for fluent Irish speakers. Darren O Ro- daigh of Gaelchultur, which runs Irish- language courses, said enrolment has more than tripled since 2020. Participa- tion has spread beyond teachers and academics to young professionals. Around 1,900 candidates sat the state- certified Irish-language exam in the 2021-22 academic year. In 2024-25 the number was nearly 40% higher. Few speak Irish daily. But seaside yoga and other gatherings are normal- ising the language. Efforts to promote it are finally bearing fruit, says Tomas O Síochain, who runs a development agency in Irish-speaking regions. Gael- ic revivalists once wanted to drive out the colonial language. That is no longer a goal. Speaking English helped make Ireland prosperous, says Mr O Sío- chain. But speaking Irish makes it Irish. Ireland The Kneecap effect DUBLIN The Irish language is up on its luck does little to solve its deeper problems, says Thane Gustafson of Georgetown Uni- versity. Ukraine’s relentless attacks on Russian oil facilities have forced energy firms to divert capital from new drilling to- wards repairs. Analysts reckon Russia has only 300,000 barrels per day (b/d) of spare capacity, making it unlikely to replace much of the Gulf’s missing 10m-15m b/d. Could high prices give Russia’s oil firms the firepower to raise output? Perhaps, but a protracted crisis could push Brent be- yond $150 a barrel, destroying demand and negating the gains. The Kremlin may raid the bounty for rearmament, leaving little room for a production increase. The Iran war is no game-changer for Russia. It was far better off before 2022, when it could sell hydrocarbons to the en- tire world and its energy infrastructure had not been degraded by strikes and sanc- tions. Higher oil prices will undo perhaps 20% of that damage, reckons Mr Vakulen- ko. But, he says, they will not prevent Rus- sia’s oil output from declining by 3% a year. As money and manpower have been fed ito the war machine, the civilian economy has been sucked dry. Hormuz has given Russia a boost. But it cannot fix all its troubles. ■ C002 -- 42 of 78 -- 44 The Economist March 21st 2026 Europe The lovers’ tiff EVEN THE happiest of marriages suffers the odd quarrel. The same goes for geopolitical alliances. When partners embark on a momentous endeavour, be it bringing up children or, per- haps, thwarting the neo-imperial designs of a Russian despot, some friction is to be expected. Thus it is that after four years of almost spousal solidarity, Ukraine and its European partners are going through a patch of conjugal bickering. For the first time, signs of acrimony have spilled into the open: both sides have been a bit short with each other, even exchanging accusations of “blackmail”. Yet fears of divorce would be premature. If anything, the couple may come out stronger from the stormy spell. In geo- politics, as in matrimony, the loudest arguments often occur be- tween partners who know they simply cannot walk away. As with domestic rows, who started it depends on which side you ask. The underlying bones of contention are easier to agree upon. Ukraine and Europe have been left discombobulated by America’s seat-of-the-pants geopoliticking under President Do- nald Trump. Sparks have flown over Russian oil, which the Euro- pean Union continues to import (albeit in much smaller quantities than in the past) in a way that authorities in Kyiv equate to betray- al. To top it all, Ukraine’s bid to join the EU is prompting disquiet in Brussels as it edges—slowly—closer to reality. The relationship with America ought to unite Ukraine with its fellow Europeans. Both would greatly like to see Mr Trump suc- ceed in his once-proclaimed desire to end the war “in 24 hours”. Both also agree the best way to do this would be for the American president to press his Russian counterpart to negotiate a truce. Alas, Mr Trump is endlessly complaisant towards Vladimir Putin and busy starting new wars instead (so much for that Nobel peace prize). The first sign of tension between Europe and Ukraine came in January in Davos, after Mr Trump launched his quixotic crusade to seize Greenland from Denmark, a NATO ally. Europe got Mr Trump to back down by showing a united front. Just as the continent’s bigwigs were basking in their diplomatic prowess, Vo- lodymyr Zelensky delivered a broadside about Europe being a mere “salad of small and middle powers” that “loves to discuss the future but avoids taking action today”. Et tu, Volodymyr? Diplomats keen to brush off the slight put it down to Mr Ze- lensky’s need to mimic the White House’s frustration at Europe doing too little to secure its own neighbourhood. Europeans will tolerate some needling from their war-torn ally in the interest of keeping Mr Trump onside. Still, the barbs left many a Euro-wallah quietly fuming. Mr Trump has cut off all aid to Ukraine and rou- tinely upbraids Mr Zelensky in public; in contrast the EU in De- cember agreed on a €90bn ($104bn) loan to succour Ukraine. It was not European leaders who started a war in Iran that is swelling Russia’s oil revenues. They understand that Mr Zelensky may need to take the odd potshot to keep Ukraine in the news, but wish he would give them the respect he gives America. Most recently, it was a flare-up over energy that highlighted the testy mood. In January the Ukrainian segment of the Druzhba pipeline that delivers Russian crude to bits of central Europe was damaged. Mr Zelensky claims it was Russia’s doing and has all but refused to fix the pipeline, arguing that proceeds from oil sales fuel the Kremlin’s war machine. This infuriated Hungary, whose prime minister, Viktor Orban, had carved out an exemption from EU sanctions to keep importing cheap crude from Russia. Mr Or- ban, in the midst of a re-election campaign that most EU leaders would like to see him lose, has used the spat to block the finalisa- tion of the €90bn package. Ukraine refused for weeks even to grant EU officials access to inspect the damage. The Europeans grudgingly backed Mr Orban, linking the promised aid package to Ukrainian co-operation on Druzhba. Mr Zelensky fumed that this amounted to blackmail, then said he might give Ukrainian sol- diers Mr Orban’s address so they could rough him up. Even as a joke it was in poor taste—and earned him a public rebuke from the European Commission. To some this undignified episode shows the pitfalls of allowing Ukraine to join the EU. The club’s existing members opened talks on Ukrainian accession in 2023, knowing full well it takes many years even for a rich, peaceful and well-run country to fulfil the membership criteria. Yet as part of peace proposals pushed late last year by America, the suggestion emerged that Ukraine should be granted early EU membership, perhaps as soon as January 2027. Ukraine is understandably keen on this shortcut. Those already in the club are less sure. They understand the prospect of fast-track EU membership would help Mr Zelensky sell a difficult truce (in- volving loss of Ukrainian territory) in a referendum. But they re- sent being bounced into such an important decision by outsiders. Attempts to resolve the imbroglio, for example by proposing Uk- raine get a sort of partial membership, have so far fallen flat. Power couple With a bit of luck, the Euro-Ukrainian spat may already be over. On March 17th Mr Zelensky belatedly acceded to EU demands that he get busy fixing Druzhba. All sides are ready to move on, blaming the recent sour mood on poor communications due to the sudden departure of Mr Zelensky’s top aide in November. Mr Zelensky’s European allies admire his stubbornness: his grit has been a big factor in keeping Ukraine in the war. Now they are on the receiving end of a bit of it themselves. Given the pres- sure Ukraine’s president is under, allowances are being made; pro- vided the €90bn package is pushed through quickly, the whole af- fair may be soon forgotten. There is, for now, no question of a broader rift between Ukraine and Europe. But if one were to de- velop one day, this is how it would start. ■ CHARLEMAGNE Ukraine and Europe are working through a conjugal squabble C002 -- 43 of 78 -- 45 The Economist March 21st 2026 Britain Britain and Europe Destination Brussels RACHEL REEVES has announced a new diplomatic push to drive Britain closer to the European Union. “I have today fired the starting gun of where we want to go next, and that is closer alignment,” Brit- ain’s chancellor told The Economist on March 17th. Earlier in the day, in the annual Mais lecture at the Bayes Business School in London, she called time on the era of a globetrotting post-Brexit Britain that could do without Europe. The country’s vi- tal national interest lay with its continental neighbours, she said. On March 18th she made her case at a meeting in Madrid with Carlos Cuerpo, the Spanish economy min- ister. Her European counterparts, she claims, are listening keenly. Since coming to office Labour has em- barked on a cautious rapprochement with the EU. A diplomatic “reset” has been fol- lowed by negotiations for de facto partici- pation in the single market in energy and agricultural products. In recent months the government has indicated it wants to go further. Yet Ms Reeves’s interview marks an escalation—the clearest indication of the scope of the government’s new ambi- tion. With it, she has put to the sword the orthodoxies about Britain’s place in the world that have underpinned the policy of both Conservative and Labour govern- ments since David Cameron’s referendum of 2016. And yet the limits on the push to return to Europe, familiar after ten years of perma-negotiations, can already be seen. Orthodoxy one: the economy. Tory gov- ernments dismissed Brexit’s impact as a rounding error. Until recently Labour dis- missed it as an intellectual “warm bath” and a distraction from domestic economic reform. Now the cost has become intoler- able. Ms Reeves cites a study that suggests the hit to GDP may be as high as 8%. “It would be foolish to just carry on as we are,” she says. Many businesses have given up trade with Europe entirely, she adds. It is a statement of fact; for years, it has also been heretical in government to say this. Trade deals beyond Europe were meant to be the glittering prize of Brexit. But combined they make less impact on growth than her government’s planned ag- ricultural deal with the EU alone, Ms Reeves says. Liam Fox, a Tory trade secre- tary, claimed that Brexit was the start of a “post-geography trading world” in which distance didn’t matter. Now geography is back. “Despite all the barriers that have been put in place, Europe remains our big- gest trading partner,” says Ms Reeves. Orthodoxy two: geopolitics. After Brex- it, governments declared that a “nimble” Britain could leap between the rival blocs of Europe, America and China. Now, Ms Reeves suggests, it is time to choose a side. “We risk being stranded between powerful trading blocs,” she says. “We have to de- The chancellor torches a decade of post-Brexit orthodoxies → ALSO IN THIS SECTION 46 The cost of driving 47 Tackling youth unemployment 50 Bagehot: CBeebies ⏩ → Read more at: Economist.com/Britain — The Duke of Edinburgh’s awards — The Church of England C002 -- 44 of 78 -- 46 The Economist March 21st 2026 Britain ▸ cide where our national interest lies.” Rather than ducking the crossfire of ris- ing protectionism, an exposed Britain finds itself “at risk of protectionist policies from those blocs”. (Britain already is on the sharp end of European efforts to reshore its car industry.) Ms Reeves refers to a speech by Mark Carney, the Canadian prime minister, at the World Economic Fo- rum calling for middle powers to club to- gether. The Iran crisis has sent gas prices spiking, presenting the Treasury with the prospect of another expensive bail-out of households (see chart). Britain has opted for Europe over America and Israel in re- fusing to take part in the war directly. The result is that Britain’s negotiating ask with the EU is much wider, aspiring to reach beyond energy and food to include more areas of the single market. The gov- ernment would rather that alignment with EU law should be the norm and divergence the exception. Ms Reeves set out some principles on where to align—that it is good for the economy, and good for na- tional security—that are so broad as to be a blank cheque. The quest of the Tory years to break free of what they called the “trac- tor-beam pull” of European regulation is over. From now on the economic gravity that demands alignment takes its course. What has changed above all is the poli- tics. Britons would vote to rejoin the EU by a margin of 52% to 29%, according to You- Gov, a pollster. In opposition, Labour was ice-cold, and none colder than Ms Reeves, who insisted that Labour could not alien- ate Eurosceptic working-class voters by re- opening the issue. Now Labour is bleeding votes to the progressive Greens and Liber- al Democrats, and Europe has gone from being a drag to a lifeboat. The reason that this overture may falter is that an awful lot remains the same. La- bour remains opposed to rejoining the sin- gle market in toto, or forming a new cus- toms union with the bloc. It still opposes free movement of people. Nor will it coun- tenance a referendum to rejoin, on the grounds that it split the country in two. “I wish that we had voted to remain, but we can’t go back in time,” Ms Reeves says. (In fact, as her political rivals know, the option for Britain to apply to join under the EU’s treaties remains right there.) And in a funny way, the policy looks fa- miliar, too. Before Britain embarked on a rock-hard Brexit under Boris Johnson, the government of Theresa May sought a deal not so different to the vision Ms Reeves sketches out, based on lockstep alignment with swathes of single-market law. Atti- tudes to Britain are now warmer, but many in the EU remain determined to resist “cherry picking”: give Britain the market access it wishes without the obligations, they fear, and the whole project unravels. Ms Reeves suggests that opposition is soft- ening, given that the EU has already agreed to deals “at a sectoral level”. Also unchanged is a certain British vagueness. Lord Cameron, Lady May and Mr Johnson too negotiated by declarations of mutual interest and overtures that nod- ded to a direction of travel, in the hope that the EU would take the lead and do the in- tellectual heavy lifting. Alignment across the board is an intriguing declaration of in- tent; it is not yet a negotiating position for an EU that likes defined proposals written in black ink. The reply to Ms Reeves may be the same as that which greeted her pre- decessors: charming sentiment, now please tell us what you really want. ■ Epic Britain, natural gas front-month futures price, pence per therm Source: Bloomberg 140 120 100 80 60 40 2024 25 26 US-Israeli air strikes on Iran begin THE WAR in the Middle East has been quick to reach Britain’s shores. With- in two weeks of bombs dropping on Tehran, the average price of petrol at forecourts rose by 8p to £1.40 ($1.90) a litre, the highest for 18 months. The price of diesel—which fuels 40% of vehicles in Britain—rose by 17p to £1.59 a litre. Cue a chorus of calls for the government to come to stricken motorists’ aid. Yet by The Economist’s calculations, it has rarely been cheaper to drive. The cost of fossil fuel accounts for only around 40% of the retail price of petrol. Another 10p per litre covers retail- ers’ costs and margins. The Treasury adds 53p per litre for fuel duty and a further 20% for VAT, which helps make petrol twice the price of America’s. But because fuel taxes in Britain are so high, pump prices are less responsive to gyra- tions in global oil markets. Deflate petrol by consumer prices and the real price of fuel in the three months before the war in Iran was lower than at any time since March 2002. Thankfully, unlike the gas-guzzlers that choked the roads during the oil crises of the 1970s, modern machines are far more fuel-efficient. Although not everyone drives a new car, the average fleet-wide fuel efficiency of Britain’s vehicles has improved by two-thirds over the past three decades. Couple that with the lower real cost of petrol, and in Feb- ruary the average petrol car could travel 100 miles (160km) on £12-worth of fuel, cheaper than at any time since compara- ble data began in 1990 (see chart). What is more, the cost of buying and maintaining a car is lower than it has ever been. According to official statis- tics, the real value of car expenditure (other than fuel) has fallen by 20% since 2000. The transition to electric vehicles (EVs), which now account for 6% of the country’s fleet, will make motoring cheaper still. Charged at home, an EV costs around £5-8 to drive 100 miles. Motoring would not be so cheap today had successive governments not frozen fuel duty since 2011. Another 5p cut followed Russia’s full-scale invasion of Ukraine in 2022. The giveaways have cost taxpayers £120bn. The Treasury has committed to adding the 5p back in September and reinstating the escalator that indexes fuel duty to inflation. But the government may struggle to resist pressure to perform another U-turn. The cost of driving U-turn if you want to By our calculations, motoring has rarely been so cheap Fuel for thought Britain, fuel cost of driving a car 100 miles, £ January 2026 prices Sources: Department for Transport; ONS; The Economist The Economist The E 25 20 15 10 26 20 15 10 05 2000 95 1990 Diesel Petrol C002 -- 45 of 78 -- 47 The Economist March 21st 2026 Britain Jobless youths Not so NEET THE BRITISH did not have much to boast about in the 2010s. Wages and growth were stagnant; the country’s inter- national reputation lay in tatters after the Brexit vote in 2016. But Britons could at least console themselves on one matter. Whereas many young continental Euro- peans were languishing on street corners— youth unemployment in Spain peaked at 56%—British school-leavers were largely spared. At the post-crash nadir, only one in five young people was unemployed. That crumb of comfort was taken away last summer, when youth unemployment in Britain overtook the EU average for the first time this millennium. The rate has climbed from 9% in 2022 to 16% now (see chart). This has swelled the ranks of the nearly 1m people aged 16-24 who are not in education, employment or training, or NEETs in the jargon. Pat McFadden, the work and pensions secretary, announced plans to tackle the issue on March 16th. His flagship policy involves paying em- ployers a £3,000 ($4,000) bung to hire young people who have been on benefits for six months. Mr McFadden’s commitment is wel- come but his solutions are inadequate. Two distinct problems drive worklessness and they need different remedies. The first is the more recent surge in youth unem- ployment—people actively seeking work but unable to find it. The culprit is a short- age of jobs. Britain’s economy is weak, with low consumer spending hitting retail and hospitality hard. Young people are espe- cially exposed: over 40% of employed 16- to 24-year-olds work in those industries, against just 16% of over-25s. When shops and pubs started to shed staff, the young were the ones who suffered. The government has made matters worse. In a victory for siloed thinking, La- bour simultaneously increased payroll tax- es, strengthened employment rights and concentrated minimum-wage increases on young people. The minimum wage for a 21- year-old will reach £12.71 an hour in April 2026, up from £8.20 in April 2020. While each measure might have been manage- able alone, their combined effect has throt- tled employer demand. The arithmetic is stark. A 21-year-old working three days a week on minimum wage will cost an employer £17,500 a year in April 2026, over £4,000 more than in April 2020 in real terms. Against that back- drop, the government’s proposed subsidy, estimated to help a narrow subgroup of 150,000 NEETs, can be only a partial fix. More worrying is the second driver of high worklessness: the large inactive pop- ulation of youngsters who are not even seeking a job. Nearly three-fifths of NEETs are economically inactive. Historically a major reason for this was women looking after children. But as teenage motherhood plummeted in recent decades, there has been a remarkable drop-off in people not working because they were caring for kids. This success has been thwarted by a coun- tervailing trend: young Britons are getting sicker. The share of inactive NEETs citing ill health has nearly tripled over the past two decades. Today almost half report a disability, with mental-health conditions and learning difficulties to the fore. Getting this group into work needs more than a £3,000 bribe to employers. The government knows it and has appoint- ed Alan Milburn, a former minister, to ex- amine what more can be done. Mr Milburn will need to tackle the benefits system, where disabled people are paid more than others but are often left with little support to find jobs. He must also probe what the government can do about the underlying causes of poor mental health among teen- agers, whether poor sleep, social isolation or too much screen time. But many of the things putting young- sters with health conditions off work af- flict all teenagers. The system fails them on many fronts. Britain’s post-school land- scape is a maze of poorly understood tech- nical qualifications. Local authorities often lose track of where youngsters go, letting many NEETs slip through the net. Appren- ticeship opportunities are increasingly tak- en up by older people: over half of starts are now by people aged above 25. This has left young people with fewer good options. The complexity of what lies behind Britain’s youth worklessness means that the government cannot solve it with one NEET trick. It must act on all fronts. It should ease up on minimum-wage rises for young people, at least until employers’ de- mand for workers recovers. It needs to re- form both the benefits and education sys- tems so that nobody falls through the gaps. And it should double down on its recent ef- forts to focus apprenticeships on young people, for whom such schemes achieve the most good. Do all that, and Britons might have something to boast about once more to their continental cousins. ■ Britain’s youngsters are increasingly out of work. Labour’s fixes fall short More steps needed Young trouble Unemployment as % of youth labour force* Source: OECD *15- to 24-year-olds 60 40 20 0 25 20 15 10 05 2000 Italy EU OECD range range r Britain Spain Germany C002 -- 46 of 78 -- 50 The Economist March 21st 2026 Britain CBeebies or barbarism! AN EPISODE OF “Hey Duggee”, a BBC children’s show, takes seven minutes to watch and about five months to make. Before Duggee—think Mary Poppins in dog form—can go to space or bake a cake or teach toddlers the rudiments of jazz, every woof and chuckle is painstakingly planned. Plots are devised, scripts written, storyboards sketched. A cast of children are shepherded in to record their dialogue. The music, which leaps from child- friendly symphonies to drum and bass, is layered on top. Last, de- signers spend seven weeks poring over every frame of that batch of episodes, like monks over an illuminated manuscript. Only then, after almost half a year, is “Hey Duggee” ready to be blasted before a toddler’s eyeballs. The BBC has lost an audience and not yet found a role. Its char- ter, which lays out the justification for its continued existence, is up for renewal amid cratering viewing figures. “Hey Duggee” and its ilk provide the easiest answer. “Auntie” is now the world’s big- gest commissioner of new kids’ stuff. Everything from “Hey Dug- gee” to “Bluey”, the life of a little blue dog, has been backed with BBC money. Rather than hammer this advantage, the BBC is, strangely, spending less. When CBeebies, its service for toddlers, was launched in 2002, the BBC spent 4% of its income on children. Now it manages barely 2%. When it comes to children, the BBC has never spent less yet mattered more. Why can’t the market do it? For many years it did. Channel 5, a commercial channel, lovingly reared “Peppa Pig”, which was a commercial juggernaut. ITV, a commercial broadcaster, once wrapped episodes of “Art Attack” around lucrative advertisements for lurid breakfast cereals. (When some middle-class parents balked at the adverts and banned their children from watching, it even served as a free lesson on the subtleties of the class system.) A shift in regulation led to market failure. Sometimes it was rules being tightened. Limits on junk-food advertising made life harder for commercial broadcasters in the 2000s. Meanwhile obli- gations were loosened. Broadcasters were no longer required to provide original children’s content. Skip forward two decades and the BBC stands more or less alone among British broadcasters for new, top-notch children’s entertainment. It is the Beeb or bust. YouTube was, briefly, a lucrative alternative for fine children’s content. After all, its audience is enormous. In total, BBC iPlayer delivers about 9bn streams a year. For comparison “Number- blocks”, a cartoon about maths shown on the BBC and YouTube, achieved similar figures on YouTube alone. But when new rules limited how much advertisers could track under-13s, revenue dropped by as much as 80%, according to Oli Hyatt, who co- founded the studio behind “Numberblocks”. YouTube by itself would not cover a fifth of his company’s costs. Even if YouTube provides the eyeballs, the BBC still pays the bills. For the cheapest content, YouTube on its own still works. Any- thing more laborious (the credits for a single “Hey Duggee” epi- sode run to 40-plus names) will struggle—particularly when big streamers are ditching fresh commissions. Between them giants such as Netflix and Disney+ commissioned 64 children’s shows in 2025, less than half as many as they managed in 2021, according to Ampere Analysis, which examines the entertainment industry. Why risk an expensive new show when reruns will sate the typical toddler? In 2025 the BBC alone commissioned 57 kids’ shows. If the private sector will not bear the risk, the public sector has reason to step in. Studio AKA, the maker of “Hey Duggee”, had no pedigree in children’s television when the BBC backed it in 2015. Risk can lead to reward. “Bluey”, an even more famous dog, was backed by the Australian Broadcasting Corporation and BBC Stu- dios, the Beeb’s commercial arm. Now Disney+ pays handsomely to broadcast it and “Bluey” is the world’s most valuable pooch. For an institution working out how to pay its way, commercial success is manna. BBC Studios, which flogs “Bluey” and “Hey Duggee” (and their merchandising rights) around the world, has revenues of £2.2bn a year. Britain is a services-export powerhouse. Sometimes it is a City lawyer in a suit; sometimes it is a dog in a scout uniform. They both show up in the GDP figures. Cartoons can feel frivolous compared with the BBC’s lofty ide- als. Why prioritise toddlers over, say, the World Service? If soft power exists, it comes in the form of “Hey Duggee” as much as a native-language news broadcast. The cartoon has been translated into dozens of languages and hit a billion views in China within a year. It was even dubbed into Persian for Iranian tots. Britain may be the “Little Satan”, but the devil has the best toons. Give me “Hey Duggee”, or give me death Platforms like YouTube now dwarf the BBC in terms of audience. For most children, “television” is the large screen through which they stream the site. The BBC has lost control of the medium but, for children’s content, it still has some say over the message. Since YouTube does not commission content, it can serve up gems only in the same way that an infinite number of monkeys can produce Shakespeare. Much of what it carries, however, is inevitably dross. And so the BBC is meeting the audience where it is and putting more of its content on YouTube, giving “Hey Duggee” a happy second home. In the process, quality children’s programming al- most becomes a public good: something freely available, yet diffi- cult for the private market to provide. There is no such problem for prestige drama or Saturday-night entertainment. By contrast, a well-made cartoon or children’s documentary falls into the same bracket as a streetlight, an army or a park—societal infrastructure to be borne collectively. The BBC is sometimes criticised as a pa- ternalist organisation. But paternalism is good for parents. If the BBC has a future, it looks a lot like a cartoon dog. ■ BAGEHOT A market failure in children’s content gives the BBC a chance C002 -- 47 of 78 -- 51 The Economist March 21st 2026 International Risk? What risk? Get paid, not aid IN THE MID-1990S the UN built an air- strip in Ngara, in the far west of Tanza- nia, to supply refugee camps near the bor- der with Burundi. Three decades later it has a different use. Over the past year the airstrip has welcomed about a dozen planes filled with potential investors, not aid workers. After a recent flight that The Economist joined, the group boarded a fleet of 4x4s for a drive in convoy through this undulating, verdant part of east Africa, passing farmers swinging rusty hoes like golfers warming up at the tee. After two hours the cavalcade reached its destination: Kabanga, home to one of the world’s prime untapped sources of nickel, a metal used in batteries for electric vehicles. Though geologists first disco- vered its potential 50 years ago, it is only now that the site may become a mine, un- der the majority ownership of Lifezone Metals, an American-listed firm. That is partly because of renewed en- thusiasm for African minerals. Kabanga is one of a number of projects that has at- tracted the attention of the American gov- ernment, which is keen to invest in critical minerals. But the interest in Kabanga also reflects improvements in the surrounding infrastructure—such as grid connections to the site, tarmacked roads and a new rail- way—that have been funded, at least in part, by African financial institutions mo- bilising money from within the continent. Kabanga is just one project in Tanzania, which is just one of Africa’s 54 countries. But it is emblematic of two broader shifts with potentially profound consequences. The first is that many foreign investors are taking a closer look at Africa, whether be- cause of its natural resources, recent im- provements in its economic outlook or fa- vourable demographic changes. The sec- ond, more important shift is that Africans are doing more to make Africa investable and are increasingly putting their own money to work. This trend is personified by Aliko Dangote, the continent’s richest man, who, having opened a $20bn refinery in Nigeria in 2023, is eyeing projects else- where (see Middle East & Africa section). These shifts are nascent. The progress they signify could stall because of poor go- vernance or the destabilising effects of a prolonged crisis like, if it drags on for months, the war in Iran. But after a quarter of a century when Africa was for many, at least in the West, synonymous with aid, the next 25 years will look very different. For more people both inside and outside the continent, Africa will mean business. Continental shift The growth of Africa will be one of the de- fining stories of this century. At present the continent accounts for about 20% of the global population, but just 3% of global GDP and 2% of worldwide trade—and it re- ceives less than 1% of private capital. By 2050 Africa’s population may well have ris- en from 1.5bn to 2.5bn, taking its global share to 28%. But whether this proves a boom or a burden depends in part on the capital Africa can attract. CAPE TOWN, KABANGA, LAGOS AND NAIROBI The future of Africa will be shaped by investment rather than aid → ALSO IN THIS SECTION 54 The Telegram: Gunboat diplomacy ⏩ C002 -- 48 of 78 -- 52 The Economist March 21st 2026 International ▸ ⏩ In 2024 Bridgewater, one of the world’s largest hedge funds, roughly estimated that sub-Saharan Africa had only half the “development financing resources”—tax revenues, aid, loans from multilateral insti- tutions, foreign direct investment (FDI) and the like—that it requires for the sort of productivity gains that would narrow its gap with the rest of the world. The Africa Growth Initiative, an arm of the Brookings Institution, an American think-tank, esti- mates that sub-Saharan Africa needs $245bn in extra finance per year, or more than 10% of the region’s GDP. For those skimming headlines about Africa, such a prospect may seem remote. Higher oil and fertiliser prices—both con- sequences of the war in Iran—will feed into African economies. Bilateral aid from Western donors to sub-Saharan Africa fell by as much as a quarter last year relative to 2024, according to the OECD, a club of mainly rich countries. China has gone from providing tens of billions of dollars in credit in the 2010s to now getting more in repayments than it extends in loans. Yet the economic importance of aid can be easily exaggerated. The continent re- ceives less in aid than it does in FDI and re- mittances (see chart 1). The IMF forecasts economic growth to be higher in Africa this year than in the Asia-Pacific region. Optimism has been apparent in bond and equity markets. African sovereign debt has its highest average ratings since 2020, according to S&P, a credit-rating agency. The value of African “Eurobonds” (denom- inated in non-local currency) sold to for- eign investors in the first part of 2026 marks the best start in a given year for the market since 2013, says Bloomberg. In 2025 several African stockmarkets, including South Africa’s, the continent’s largest, re- corded record highs. (The Iran war has re- versed some but not all of the gains.) From 2022 to 2024 Africa attracted more greenfield FDI (going to new projects rather than acquiring, say, a mine already in operation) than did South-East Asia. FDI into COMESA, a group of 21 countries in east and southern Africa, saw the largest increase among any regional grouping globally in 2024. Venture-capital deals worth some $4bn were sealed in Africa in 2025, almost four times more than in 2020. The volume of private credit deals in Afri- ca rose by almost a quarter. The value of in- bound M&A deals into Africa was 40% higher in 2025 than in 2024, notes Herbert Smith Freehills Kramer, a law firm. For some foreign investors Africa’s ap- peal remains its resources. America is try- ing to loosen China’s stranglehold on va- rious critical minerals. Part of the solution lies in Africa, where the estimated worth of undeveloped mineral assets is $8.6trn, three times Africa’s GDP. “Without the Af- rican continent all is lost,” says Robert Friedland, the founder of Ivanhoe Mines, a Canadian firm that jointly operates one of Congo’s largest mines. “The momentum is real and doesn’t come along very often,” says Chris Showal- ter, CEO of Lifezone Metals. In a sign of the new stress on “commercial diplomacy”, America has made it known to Samia Sulu- hu Hassan, Tanzania’s president, that its support for her is based on her ability to make progress on three projects: Kabanga, a graphite mine, and a liquefied natural gas (LNG) project involving ExxonMobil, an American energy giant. In the Democratic Republic of Congo a fund backed by the American and Abu Dhabi governments is bidding for 40% of Glencore’s stakes in two mining opera- tions. America is also supporting a bid by three former American military officers to buy Chemaf, a copper-cobalt asset. Others are piling in, too. International Resources Holding, an Emirati conglomer- ate, bought a majority stake in a Zambian copper mine in 2024 and a tin mine in Con- go in 2025. Also last year the Qatar Invest- ment Authority, a sovereign-wealth fund, took a $500m stake in Ivanhoe, and Japan and India agreed to a partnership to invest in African minerals, among other things. Though China is lending less, its firms are busier than ever. In November Guinea finally started operations at Simandou, one of the largest iron-ore projects in the world, backed by several Chinese firms and Rio Tinto, an Anglo-Australian mining giant. In the last two years Chinese firms bought a rare-earths project in Tanzania, a copper mine in Botswana and gold mines in Congo, Ghana and Ivory Coast. Kaban- ga has attracted interest from several Chi- nese companies. In August two Chinese firms bought tens of thousands of hectares in Angola to grow soyabeans and grain. For Europe Africa offers chances to di- versify its energy sources. In January Tota- lEnergies, a French energy giant, resumed construction of a $20bn LNG project in northern Mozambique. In February ENI, an Italian firm, announced two new Afri- can discoveries of oil and gas. Gulf investment in Africa may decrease in the near term but the continent’s poten- tial in logistics and food, two priority areas for Middle Eastern investors, will remain. Last year Saudi Arabia’s Public Investment Fund (PIF) paid $1.8bn for a controlling stake in Olam Agri, a Singaporean agri- business firm with a big presence in Africa. Invictus, a Sudanese-Emirati agricultural trader, is expanding across the continent in an effort to rival Olam. Last year Vision Invest, a Saudi Arabian firm which is fo- cused on infrastructure, took a stake in Arise IIP, which runs industrial sites (across 14 African countries) at which raw materials are used to make processed goods (such as cotton for T-shirts). In 2023 DP World, a ports and logistics firm based in Dubai took over the running of the port of Dar es Salaam, from which nickel from Kabanga would be exported. Animal spirits Other investments can be seen as bets on the world’s fastest urbanising region with its rising consumer class. Chinese firms are building apartment blocks in big cities like Dar es Salaam and Nairobi. Asahi, a Japa- nese beermaker with ageing customers at home, last year paid $2.3bn for a stake held by Diageo, a British distilling giant, in East African Breweries. Venture capital in Africa, though a frac- tion of the global total, has helped produce several unicorns (companies valued over $1bn), including Flutterwave, a Nigerian payments firm, which reportedly expects to go public in the next few years. (The London Stock Exchange is trying to attract African listings as a way to boost its disap- pointing record of tech listings.) “Africa feels like Sweden 20 years ago,” says Hans Otterling, an investor who made a fortune via Spotify and now invests in Africa. “This is not charity. This is showing the rest of the world you can make money in Africa.” There have been bursts of enthusiasm from foreign investors in Africa before. But the context this time is different. In part Raising stakes Africa, external finance by source, $bn Sources: OECD; UNCTAD; World Bank 120 100 80 60 40 20 0 24 23 21 19 17 15 13 2011 Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development Official development assistance assistance assistance assistance assistance assistance assistance assistance assistance assistance assistance assistance assistance oreign direct investment Foreign direct oreign direct Foreign direct oreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct Foreign direct iinvestment nvestment nvestment nvestment nvestment nvestment nvestment nvestment nvestment Remittances 1,500 km African railways, December 2025 Existing Out of service* Under construction Planned *May be repaired/replaced Source: Africa Finance Corporation C002 -- 49 of 78 -- 53 The Economist March 21st 2026 International ▸ because of the shock of tariffs and aid cuts, African policymakers are doing more to open up their markets and reduce frictions between African countries. At the same time African capitalists are also spending more money at home. “The era of aid or free money is gone,” says Akinwumi Adesi- na, ex-president of the African Develop- ment Bank (AfDB). “Africa must now learn to develop via investment discipline.” Part of the story is what individual countries are doing. South Africa’s liberal- isation of its state-owned enterprises is at- tracting investment in its power and other industries. The spending by Tanzania that has made Kabanga a more enticing pros- pect—on roads, rail and energy—is a re- minder of the steady progress in infra- structure in many places. From 2025 to 2029 more railways will be built in Africa than in the previous ten years, according to the Africa Finance Corporation, a Lagos- based outfit (see map on previous page). Then there are continent-wide efforts to better integrate Africa’s labour, product and capital markets. Today 31 countries of- fer e-visas to other Africans, up from nine in 2016. The African Continental Free Trade Area (AfCFTA) would be the largest duty-free area in the world by number of inhabitants if fully implemented. It was first announced in 2012, but it is only re- cently that goods have actually been trad- ed through a pilot project called the Guid- ed Trade Initiative. Separately, AfCFTA has streamlined rules around data and, via the Pan-African Payment and Settlement System, has also allowed many African firms using different currencies to trade without first having to exchange local currency into green- backs. The World Bank estimates that full implementation of the AfCFTA could boost FDI by up to 120% and increase intra-Afri- can investment by 85%. Mr Dangote has cited the potential of the AfCFTA as one of the reasons for his re- cent investments. At his refinery on the outskirts of Lagos, the main nerve centre resembles a NASA mission’s control room. More than 50 screens show the myriad ele- ments of the complex: fuel refineries, a fer- tiliser plant and a polymer-processing fa- cility. He tells The Economist he wants to expand both the fuel and fertiliser parts so they are the biggest in the world. Last year he announced a $2.5bn fertil- iser project in Ethiopia and $1bn-worth of deals in Zimbabwe. He then reels off a list of other potential schemes, including min- ing projects in central Africa and a vast in- dustrial park in Nigeria that uses the gas produced from his refinery. “We believe in Africa, and we’re investing despite all the hurdles in Africa,” he says. Rostam Aziz, a Tanzanian industrialist and another of Africa’s richest men, is busy making huge investments of his own. In August Africa’s largest liquefied petroleum gas (LPG) terminal, which Mr Aziz is build- ing, is likely to begin operations in Kenya after years of delay. His firm, Taifa Group, also plans to invest $500m in Zambian in- dustry in the next two years, starting with the supply and distribution of LPG. “We’ve got the gas and they need gas,” Mr Aziz says. “Soon they won’t need to worry about supply from anywhere else.” Mr Dangote and Mr Aziz show how the most promising—and potentially conse- quential—development of all is the growth of African firms (see chart 2) and especially of their investments in Africa. For though it is foreign investors who are often blamed for seeing Africa as too risky, African in- vestors have long been wary too. Many have tried to park their money in ostensi- bly safer places like Dubai. The more than $1trn in assets on the balance-sheets of pension funds, insurance funds and the like have long been skewed towards gov- ernment bills and bonds. Might this finally be changing? Richard Okello, the CEO of Sango Capital, a pan- African investor, argues that there is a “qui- et tsunami” that has largely gone unno- ticed, but “the waves are about to break”. A new batch of sovereign-wealth funds have mandates to invest in infrastructure. Hith- erto sleepy pension funds are getting big- ger, partly because of the compounding ef- fects of time and demography (when fertil- ity rates fall, as they are doing in Africa, savings rates tend to increase) and partly because of regulatory changes that are having a sneakily big impact. Last year Kenya expanded tax relief on pension contributions, leading to an influx of deposits. Ghana mandated that 5% of its state pension fund’s investments go to private equity and venture capital. South Africa made similar changes two years ear- lier. Smaller funds, such as Uganda’s and Rwanda’s, are now making similar moves. Nearly 50% of venture capital raised last year came from African investors. Ini- tial public offerings outside South Africa, once a rarity, are becoming more common as institutional investors seek equity in- vestments on the continent. Africa-fo- cused infrastructure investors are also ex- panding. The Africa Finance Corporation increased its investments to $4.5bn last year, roughly $2bn more than its total in the previous two years, according to Sa- maila Zubairu, its CEO. Mr Zubairu argues that his outfit meets the latent demand, inside and outside the continent, for an African investor who can set up deals that are ready to go, once fi- nanced. “Our view is that Africa has a lot of potential but not enough bankable pro- jects,” he argues. His managers on the ground ensure that projects, whether wind farms, railways, smelters, gas plants or gold mines, have the infrastructure and regulatory approvals needed to get from blueprint to real-world operation. In pro- jects such as the extension of the Lobito Corridor to Zambia (an American- and EU- backed railway that currently goes from Angola to the Congo copperbelt) his bank invests risk-bearing capital, so is on the hook for first losses. Yet he notes that his loan-loss ratio is 0.7%, towards the lower end of what is normal for global banks. Better together “If local capital invests, foreign capital fol- lows,” says Hendrik du Toit, CEO of Ninety One, an Anglo-South African asset-man- agement firm. These sorts of joint invest- ments may increasingly be a part of Afri- ca’s future. Hakainde Hichilema, Zambia’s president, and a former businessman (he is one of the few world leaders with an MBA), says there has been a “sea change” in how deals are done in Africa. Rather than things being done to Africa, as he puts it, deals are increasingly “partnerships”. Some of the old-line investors in Africa, like development funds from rich coun- tries that focus on boosting private firms in emerging markets, are already investing alongside African peers. In June British In- ternational Investment, Britain’s private- sector development arm, struck a deal to invest across Africa with South Africa’s Public Investment Corporation, one of the largest asset managers on the continent. Anecdotally African fund managers also say there is a sense among some of their rich clients outside the continent that, when America is more volatile, Europe is ageing and China is slowing, Af- rica is worth a bit more of an allocation. The chaos in the Gulf may lead to a reas- sessment of its riskiness, too. It probably also helps that African investments tend to have low correlations with assets based in other countries. With increasingly active investment by Africans themselves, the time is ripe. “We’re showing people that, yes, OK, it can happen also here,” says Mr Dangote. “Because if we don’t, there’s no- body that can come and do it for us.” ■ Cashing in Africa, combined annual sales of 500 largest companies, $bn Source: The Africa Report  800 600 400 200 0 24 22 20 18 16 2014 C002 -- 50 of 78 -- 54 The Economist March 21st 2026 International America’s failing gunboat diplomacy GUNBOAT IMPERIALISM so thrills President Donald Trump, he ought to start wearing mutton-chop whiskers, a frock-coat and a sword. Especially in his second term, Mr Trump has repeat- edly startled the world by applying 19th-century methods to mod- ern security problems, like a latter-day William McKinley. Sadly for Mr Trump, the world keeps startling him in return. Time and again threats and shows of force fail to work quite as ex- pected, leaving his officials unable to hide their puzzlement. On February 19th, days before America and Israel pounded Iran, Fox News interviewed Steve Witkoff, Mr Trump’s all-purpose dip- lomatic fixer. Mr Witkoff, a garrulous sort, described his boss as “curious” that Iran’s leaders had not “capitulated”. Why, he mused aloud, had Iran not negotiated an end to its nuclear ambitions, given the American firepower amassed off its coasts? After war began and Iran closed the Strait of Hormuz to most shipping, official Washington filled with claims that Mr Trump was surprised by this defiance, too. Pete Hegseth, Mr Trump’s sec- retary of war, testily denied that the administration had been tak- en unawares. He insisted that the Pentagon had plans to reopen this vital route. A few days after that, however, Mr Trump demand- ed that China and European allies help him open it up. Iran is not the only example of Trumpian over-confidence. In January America’s special forces captured Venezuela’s dictator, Nicolás Maduro, and hauled him away for trial in New York. After that raid Mr Trump was able to pick a pliant new Venezuelan lead- er, Mr Maduro’s vice-president, Delcy Rodríguez. Mr Trump calls that a “perfect” outcome and wants to pick Iran’s new leader in the same manner. But the reality is that Mr Trump had initially mis- calculated his leverage in Venezuela. Weeks earlier, the presi- dent’s chief of staff, Susie Wiles, explained the rationale for a campaign of American air strikes against boats accused of smug- gling drugs from Venezuela. Mr Trump “wants to keep on blowing boats up until Maduro cries uncle”, she told a reporter. That was a bizarre misjudgment. A ruthless sort, Mr Maduro could not care less about alleged drug-runners being vaporised by American missiles. Hence the need for his spectacular capture. Mr Trump is too sure that he can cow foreign leaders by threat- ening to bomb their countries. And he is overconfident that con- flicts could be ended quickly, if only warring parties could under- stand that peace would bring an economic boom. In the words of his vice-president, J.D. Vance, Mr Trump does not understand why Russians and Ukrainians keep killing each other and do not “en- gage in some commerce with one another”. Mr Trump has long struggled to understand people who be- lieve in anything more than moneymaking, notoriously calling American soldiers “suckers” for dying in foreign wars. In his sec- ond term that obtuseness has been joined by a nostalgia for impe- rialism. A speech that Mr Trump delivered earlier this year is most- ly remembered for blunt demands that Denmark sell him Green- land, its Arctic island possession. Fewer remarked on his tribute to colonialism as an institution. There is “nothing wrong” with ac- quiring territory, Mr Trump averred, sounding almost wistful about European empires that “had great, vast wealth, great, vast lands, all over the world” before going “in reverse”. This was no one-off slip of the tongue. After Mr Maduro’s cap- ture, Mr Trump boasted of outdoing his 19th-century predecessors in demonstrating “American dominance” over the western hemi- sphere. In February Marco Rubio, Mr Trump’s secretary of state, praised the missionaries and soldiers who set sail from Europe to build global empires, among them his own Italian and Spanish an- cestors. Mr Rubio lamented that the decline and fall of those “great Western empires” was accelerated by “godless communist revolutions and by anti-colonial uprisings that would transform the world and drape the red hammer and sickle across vast swathes of the map”. Turning to the present, Mr Rubio rebuked Europe’s former imperial powers for admitting too many immi- grants and for being “shackled by guilt and shame” about the past. This is horribly selective history. The British, French and other empires did not vanish because Europe turned woke. Post-war Europe was broke and policing colonies was an increasingly costly and bloody business. Nor was Marxism the imperialists’ only foe. Many colonies were toppled by popular nationalism, the very same political force that Mr Trump urges every country to em- brace. Moreover, nationalism was often stoked by aggressive colo- nial meddling, of the sort that Mr Trump relishes today. Just ask the British, who in 1942 made Egypt’s young king appoint a new government by surrounding his palace with tanks. Such humilia- tions radicalised a generation of nationalist army officers, who lat- er pushed Britain out of Egypt and in time the Middle East. When America stood for liberty Most relevant of all, Europe’s empires crumbled under sustained pressure from America. For sure, American anti-colonialism in- cluded a hefty dose of hypocrisy. In 1953 the CIA joined British spooks in organising a coup to overthrow Iran’s leader, Muham- mad Mosaddegh, after he flirted with communism and national- ised British-controlled oil interests. Latin America saw CIA- backed coups. But, as long as America was locked in a worldwide battle of influence with Soviet communism, successive presidents wished to be seen to be defending the rights of each and every people to govern themselves. America stood for freedom and pro- gress, not with faded imperialist bullies. Today, China is America’s worldwide rival and loves to talk of post-colonial solidarity with the global south. To Chinese leaders, Mr Trump’s global power-grabs are a propaganda gift. For now, alas, he seems too enraptured by gunboat diplomacy to care. ■ THE TELEGRAM Like some fusty old imperialist, Donald Trump is flummoxed by foreigners C002 -- 51 of 78 -- 55 The Economist March 21st 2026 Business Artificial intelligence Space Nvader IN THE WORLD of tech few events are as keenly awaited as Jensen Huang’s speech at Nvidia’s annual developer con- ference. And at this year’s gathering in San Jose on March 16th his talk did not disap- point. Over two hours, the boss of the world’s most valuable company unveiled new chips, artificial-intelligence models and systems for everything from space- based data centres to self-driving cars. He went on to claim that this array of new pro- ducts will help Nvidia sell over $1trn-worth of AI-related hardware in the coming years. Among engineers, the reaction was en- thusiastic. Among investors, it was guard- ed. Doubts have grown about the durabil- ity of the AI boom. And Nvidia, the biggest beneficiary of the spending surge, has be- come a lightning rod for those concerns. On February 25th the firm reported record quarterly profits and forecast strong growth. Yet its share price fell the next day. Since peaking in October it has dropped by about 13%, even as an index of American chipmakers has risen by around 6%. Such bearishness marks a change to Nvidia’s fortunes. The company’s graphics processing units (GPUs), the workhorse semiconductors used by AI models, ac- count for over two-thirds of the total pro- cessing power available on the world’s AI chips. In the year to January the firm gener- ated $216bn in revenue, eight times what it made three years earlier. It took nearly three decades for Nvidia to reach a market value of $1trn; it vaulted to $4trn barely two years later. Four months after that it briefly surpassed $5trn. How high can Nvidia climb? Much higher, if Mr Huang is to be believed. He has claimed that the hundreds of billions of dollars spent so far on AI infrastructure are just the start and that “trillions” more will follow. What is more, Nvidia has the resources to exploit the opportunity. Its free cashflow is greater than those of the other tech giants (see chart on next page). The firm holds more than $62bn in cash, a third of it generated in the past year. Mr Huang therefore plans to change Nvidia into a “foundational company” on which the AI economy rests. That means selling different types of chips and hard- ware, bundling products into complete AI systems and embedding Nvidia’s technol- ogy more deeply into different indus- Nvidia, the biggest beneficiary of the AI boom, is trying to move beyond chips → ALSO IN THIS SECTION 57 America’s bankruptcy boom 57 Airlines grapple with the Iran war 58 The Iran war rocks BASF 59 Can Indian IT survive AI? 59 Zara goes upmarket 60 Bartleby: Mastering employee surveys 61 Schumpeter: Elliott Management ⏩ C002 -- 52 of 78 -- 56 The Economist March 21st 2026 Business ▸ tries. In short, Nvidia is becoming much more than an AI chipmaker. The transformation is needed partly because Nvidia’s success has attracted competitors. Some are conventional rivals, such as AMD, an American chipmaker that has released decent alternatives to Nvidia’s GPUs. Others are startups spying opportu- nities. New chip designs are become com- mercially viable because the need for infer- ence (AI models answering queries) is growing, and the process places a different set of demands on chips from training. Ac- cording to PitchBook, a data firm, young chip firms raised $17bn in 2025, more than in the previous two years combined. But the most formidable challengers are Nvidia’s customers. The hyperscalers— Alphabet, Amazon, Microsoft and Meta— which all rely on vast numbers of data cen- tres to run their businesses, buy huge quantities of its chips. In the latest finan- cial year just three of these hyperscalers accounted for over half of Nvidia’s receiv- ables, money owed but not yet paid. Yet these same firms are also designing their own processors. This can slash the cost of AI chips by more than half, while improv- ing performance by tailoring hardware to the software that runs on it. Souring geopolitics has encouraged ri- vals abroad. Since October 2022 America’s government has barred Nvidia from selling its most advanced chips to China. Sales have slowed dramatically. Bernstein, a bro- ker, says local suppliers such as Huawei, Cambricon and MetaX could grow from less than a fifth of China’s AI-chip market in 2023 to more than nine-tenths by 2027. Jay Goldberg of Seaport Research Part- ners, a firm of analysts, notes that the threat may extend beyond China. The new rivals may not produce chips as powerful as Nvidia’s, but in some markets “good enough” could prove good enough. Everything, everywhere all at once Nvidia’s response is to expand in all direc- tions. Mr Huang has compared the AI in- dustry to a “five-layer cake”: energy, chips, networking infrastructure, models and ap- plications. Nvidia intends to take bites out of three of the five layers. Having conquered the market for GPUs, the firm plans to sell different types of chips. In December Nvidia paid $20bn to license technology and hire engineers from Groq, a startup specialising in infer- ence chips. On March 16th the company unveiled a new chip using the startup’s knowhow. It is also pushing into central processing units (CPUs), a type of general- purpose chip. This is an area long domin- ated by Intel, a beleaguered giant. Nvidia already builds CPUs using designs from Arm, a British firm, which are used in its AI servers. Now it plans to sell them more broadly. In February Nvidia struck a deal with Meta to supply CPU-only servers. Nvidia is also investing in other layers. As AI systems scale, moving data between processors has become as important as the processors themselves. The firm is betting heavily on networking equipment, the technology that links chips together. In its most recent quarter this business generat- ed $11bn in revenue, making Nvidia one of the largest players in the field. Model-making is the third layer. Nvidia has released several families of open- source AI models. These are specialised and aimed at specific industries. That in- cludes Alpamayo for self-driving cars, GR00T for robotics and BioNeMo for bio- medical research. They often rank highly on open-source AI leaderboards. Nvidia plans to invest billions to expand its capa- bilities in this layer of the stack. One reason for owning the “full stack”, as Silicon Valley calls vertical integration, is that it makes it easier to co-ordinate the different layers. By tightly linking chips, data-centre equipment and models, the company says it can extract better perfor- mance than by each part being designed separately. Mr Huang has compared build- ing AI systems without integration to con- necting “too many cats and dogs”. It also means Nvidia can sell its hard- ware in bundles. Increasingly the company describes its products not as chips but as components of “AI factories”, its term for specialised AI data centres. Some of these factories are being sold directly to govern- ments under the banner of “sovereign AI”, the label for state-led efforts to build do- mestic AI infrastructure. Revenue from sovereign AI tripled last fiscal year to more than $30bn, about 15% of Nvidia’s AI sales. The company is also trying to rely less on the hyperscalers that dominate its cus- tomer list. One approach is to push deeper into industry. In carmaking, Mercedes- Benz will soon ship vehicles equipped with Nvidia’s self-driving systems. In pharma- ceuticals, Eli Lilly uses Nvidia’s infrastruc- ture and models to accelerate drug discov- ery. Dion Harris, an Nvidia executive, says the aim is to work more closely with end customers, such as Lilly and Mercedes, to understand their needs and shape the next wave of AI. But Nvidia is not the only one to say it is working closely with clients. Such moves put the firm on a collision course with the hyperscalers, which offer similar services. Placing their chips Another approach is to create demand through its investments. Nvidia-backed firms, the idea goes, are more likely to buy its chips. Thus the firm is now one of Sili- con Valley’s most prolific investors. Since 2020 it has made some 200 investments, committing over $65bn (see chart 2). That includes such big bets as a $30bn invest- ment in OpenAI, and small ones on firms in robotics, software and AI applications. The firm’s investments also help to se- cure its supply chain. This March Nvidia put more than $4bn into companies devel- oping optical interconnects, which use light to transfer data rather than wires. Most AI data centres still rely on copper ca- bles to link their equipment. Nvidia’s bet suggests it expects optical connections to become increasingly important. Ben Baja- rin of Creative Strategies, a consultancy, compares the strategy to Apple’s early moves to corner components for the iPod. Nvidia is using its cash pile to strength- en other parts of its supply chain. The semiconductor industry is prone to short- ages when demand surges. Supplies of ad- vanced memory—critical for AI chips—are already sold out for this year and for much of next. Nvidia bought most of the memo- ry it will need this year, and part of next, well in advance. None of this ensures Nvidia’s contin- ued dominance. Rivals may erode its mar- gins. The industry’s shift from training models to running them may favour chips from other vendors. And if AI spending cools, sales could slow sharply. But for now, the champion of the AI age remains dominant—and seems intent on expand- ing its empire. ■ Cached up Selected tech companies, 2026 forecast, $bn Source: Bloomberg *Year to end of January  Amazon Meta Alphabet Microsoft Nvidia* 250 200 150 100 50 0 -6.2 7.7 23.6 70.9 181.4 Free cashflow Operating cashflow Capital expenditure Venturing out Nvidia, investment deals Source: PitchBook  70 60 50 40 30 20 10 0 25 24 23 22 21 2020 Other Early-stage venture Late-stage venture C002 -- 53 of 78 -- 57 The Economist March 21st 2026 Business ⏩ American business Of cockroaches and canaries FINANCIERS SEEM unable to resist fauna metaphors when describing troubled company balance-sheets. When Tricolor Holdings and First Brands, two auto-in- dustry firms, declared bankruptcy in Octo- ber, Jamie Dimon, boss of JPMorgan Chase, likened the situation to a “cock- roach”—where there is one bad loan, there are probably more. In February, after Blue Owl was forced to ban capital withdrawals from a private-credit fund amid an on- slaught of redemption requests, Mohamed El-Erian, an investor, pondered whether the lender’s troubles were a dead coalmine canary or something worse—like termites, indicating deep structural problems. Not long ago it seemed as though the corporate-debt blow-up many had feared when central banks began raising rates had been averted. Default rates rose, reaching 5% of the value of speculative-grade debt in America in 2024, but declined last year (see chart). Between the first six months of 2021 and the same period in 2025, the debt of America’s non-financial firms as a share of GDP fell from 164% to 141%, as they de- leveraged in response to higher rates. Now the nervousness is back. On March 13th America’s GDP growth for the fourth quarter of 2025 was revised down to 0.7%, below investors’ expectations. Then war in the Middle East sent energy costs soaring. The impact on prices may make the Federal Reserve’s rate-setters reluctant to ease the burden on borrowers. Previous energy shocks led to a wave of defaults. Meanwhile, investors are fretting that arti- ficial intelligence will make all sorts of businesses obsolete. The anxiety has been heightened by the opacity of the private- credit market, which has expanded over the past few years and has become a big source of lending to the riskiest borrowers. Although the headline default rate on priv- ate-credit loans currently remains below 2%, the true figure is now much higher. Consider a company unable to keep up with interest payments on a private loan. “No one wants to end up in bankruptcy court. It’s expensive, and it spooks employ- ees, customers and suppliers,” says Tuck Hardie of Houlihan Lokey, a bank. Instead, the troubled company—often guided by a private-equity owner, since many private- credit borrowers have one—may first seek a “payment in kind”, in which it adds the interest it owes to its loan balance. For list- ed private-credit funds, such arrangements made up 5-6% of income five years ago, and now make up 8%. Another option is “li- ability management”. This can be thought of as yoga for failing firms—repayment ti- melines are stretched and obligations con- torted in ways few thought possible. Once such manoeuvres are included, the default rate in private credit rises to around 5%. These workarounds can give borrowers time to right their businesses. And if they can’t, bankruptcy may still be dodged. Public losses embarrass private- equity firms; a quiet handover to creditors is often preferred. A recent study by Gold- man Sachs, another bank, supports this. Since 2023 around 100 private European companies—including Bonhams, a British auction house; Dainese, an Italian sports- wear brand; and Tapì, an Italian bottle-cap maker—have been handed to lenders in debt-for-equity swaps, often called “taking the keys”. The result is that trouble could be spreading well before it shows up in the usual indicators of corporate distress. By then, the termites may have settled in. ■ WASHINGTON, DC Corporate bankruptcies are back Default position United States, speculative-grade debt Default rate, 12-month trailing, % Source: S&P Global 7 6 5 4 3 2 1 0 25 21 23 2015 17 19 Global aviation Clearing the air HOSTILITIES IN THE Middle East are a reminder that the region is not just crucial to the global supply of oil and gas but a vital conduit for the world’s airline passengers. Over the past two decades the Gulf’s “super-connectors”—Emirates, Eti- had and Qatar Airways—have helped long- haul flyers travel across the world. Amid the conflict, tens of thousands of those passengers have been stranded. Efforts to restart “limited” services have been halt- ing. On March 16th Emirates was forced to cancel flights and reroute some planes mid-air after a drone attack on Dubai’s air- port. The impact on the global airline busi- ness may persist well after the war ends. The Middle East has come to play a central role in aviation. Before the conflict IATA, a trade body, had forecast that the re- gion would bring in 17% of the $41bn in net profits it expected for the global airline in- dustry in 2026. Emirates is the world’s big- gest international carrier, and the most profitable one, too. It and its short-haul partner, FlyDubai, placed large orders for planes at the Dubai airshow in November, as did Etihad, betting on further growth. That now looks under threat. Dubai’s development as a tourist and business hot- spot means that it has become the destina- tion for around half of Emirates’ passen- gers. Connecting flyers, who only have to spend a few hours in Gulf airports, may come back once the war ends, lured per- haps by huge discounts. The tourist trade will be harder to recover. The Gulf’s carriers are not the only ones affected by the conflict. Other air- lines that fly over the area must switch routes. European carriers flying to Asia have had to avoid Russian airspace since the start of the war in Ukraine; transiting the Middle East became a popular alterna- tive. Skirting another combat zone is add- ing more time and burning more fuel. And that fuel is becoming dearer. The price of crude oil now hovers around $100 a barrel, compared with roughly $70 before the war. But the impact is even more severe for airlines. The price difference between jet fuel and crude, or the “crack spread”, has grown. That is in part because 20% of the world’s jet fuel passes through the Strait of Hormuz, notes James Noel-Bes- wick of Sparta Commodities, a data pro- vider. Prices have more than doubled since the fighting started, to an average of around $190 a barrel. War may bring lasting change to the airline business C002 -- 54 of 78 -- 58 The Economist March 21st 2026 Business ▸ The impact will be uneven. For low-cost carriers, fuel accounts for about a third of costs, compared with a fifth for legacy air- lines. Carriers also vary in their level of protection. Some, such as Ryanair, IAG and Qantas, are well hedged against near-term price rises, softening the blow. America’s big carriers, however, are typically unpro- tected, having deemed hedging unneces- sarily complicated and costly (though Del- ta Air Lines owns a refinery, which will help). If fuel prices remain high throughout the year, it could cost them tens of billions of dollars, according to Deutsche Bank. In response to soaring fuel costs, some air- lines are starting to ground aircraft. Air New Zealand is axing around 1,100 flights between now and early May. All this presents an opportunity for some carriers. With Gulf airlines out of ac- tion and others halting flights, fares have surged. British Airways, part of IAG, has al- ready added extra flights to Singapore and Bangkok. Germany’s Lufthansa has report- ed a 60% jump in bookings for flights to Asia in March. Demand for air travel will suffer in the short-term, particularly if surging energy prices drag down econom- ic growth. But in the past it has tended to bounce back swiftly after disruptions. In the meantime, the Gulf airlines’ rivals will relish the chance to win some of their cus- tomers back. ■ European chemicals Noises off WHEN CHIEF executives speak of a “transition year”, they are usually telling investors that a hard 12 months lie ahead. On February 27th, when he present- ed BASF’s annual results, Markus Kamieth said that for the German chemicals giant 2026 was “likely to be another year of tran- sition, during which our industry must ex- pect to face significant headwinds”. On a cheerier note, he expected the global mar- ket to be looking up by the end of the year, with better to come in 2027. That could only be good for BASF’s own recovery from a rough few years. The next day America and Israel at- tacked Iran. Depending on how long it lasts, the war puts that recovery in doubt. When Mr Kamieth, 27 years at BASF and a former head of its Asian operations, suc- ceeded Martin Brudermüller in April 2024, he inherited a firm reeling from another war, in Ukraine. As Germany’s biggest in- dustrial consumer of Russian gas (its vast plant in Ludwigshafen, its home city, used to guzzle around 4% of Germany’s pur- chases), BASF was hard hit by the loss of those cheap supplies. It lost its crown as the world’s biggest chemicals company by revenue to a Chinese rival. Mr Kamieth embarked on a thorough overhaul. He closed some of BASF’s opera- tions in Ludwigshafen, as well as in Knap- sack and Frankfurt. Last year he cut costs by €1.7bn ($2bn), €100m more than his ini- tial target. This year he is aiming for anoth- er €2.3bn. In October he sold 60% of BASF’s coatings business for €7.7bn, over €1bn more than analysts had expected, to Carlyle, a private-equity firm. He plans to list its agricultural unit on the Frankfurt stock exchange next year. Thanks to Mr Kamieth’s slimming cure, BASF is looking healthier. It made a net profit of €560m in the fourth quarter of 2025, following a €786m loss a year earlier. BASF is also buy- ing back €1.5bn-worth of shares. So far, says Sebastian Brey of Berenberg Bank, Mr Kamieth has shown sensible leadership in a difficult environment. Investors seemed content: last year the share price started to recover. They also believed that European politicians would be more supportive of the chemicals in- dustry and that the German government’s plans to spend loads on infrastructure would help employ unused capacity. An- alysts even began to look more favourably on BASF’s $10bn investment in Zhanjiang, in southern China, which has not yet yield- ed a profit. China, too, has overcapacity in chemicals. But at some point that will moderate; and China will still account for around half of the world’s chemicals de- mand and the bulk of its growth, says Mi- chael Schäfer of Oddo BHF, a Franco-Ger- man bank. Despite China’s importance, it brings in just 13% of BASF’s sales. Now the Iran war casts a shadow over the industry and BASF’s nascent revival. “So far we have not been strongly affected by the war,” says Jens Fey, a company spokesman. True enough, the company has no production sites in the Gulf. The plant in Zhanjiang (BASF’s third-largest after Ludwigshafen and Antwerp, in Belgium) and its 28 others in China are operating as usual. BASF is producing “local for local”, so it is less affected than many other com- panies by disruptions of global trade. These days the company’s European sites get most of their gas from Norway. But what if the conflict drags on? Some parts of BASF’s business will probably struggle with higher energy prices, points out James Hooper of Bernstein Research, although others could reap supernormal profits, because around one-quarter of the world’s supply of chemicals such as ethyl- ene and ammonia are stuck behind the Strait of Hormuz, hurting BASF’s rivals. However, Mr Hooper says, “the main indi- rect effect of the war is demand destruc- tion.” He forecasts that a month of war could decrease BASF’s guidance for EBIT- DA (earnings before interest, tax, deprecia- tion and amortisation) this year by 3%, three months could shave off 10% and ten months 32%. BASF has indicated that EBIT- DA will lie between €6.2bn and €7bn. All this means that 2026 could indeed be a difficult year, with more hope pinned on 2027. Europe’s chemicals industry is due for further consolidation, and BASF is still likely to be among the buyers rather than the bought. But much still depends on Mr Kamieth’s continuing turnaround plan and whether Zhanjiang can at last make a profit. The war in the Gulf, though, will make the job no easier. ■ BERLIN The Iran war casts a shadow over BASF’s nascent revival Running on fumes? C002 -- 55 of 78 -- 59 The Economist March 21st 2026 Business ⏩ India’s IT industry Coding against the machine THIS YEAR’S edition of the annual jam- boree for Indian IT firms, held last month in Mumbai, was a study in con- trasts. The president of Nasscom, the in- dustry body, hailed a new sales record: it expects that its members will have enjoyed combined revenue of more than $315bn in the year to March, up by 6% on the year be- fore. Yet delegates tearing their eyes from the stage and glancing at their phones would see share prices plunging. The Nifty IT index dropped by around a fifth follow- ing a viral blogpost that imagined new arti- ficial-intelligence coding tools would wipe the industry out altogether (see chart). The case for gloom is obvious. For de- cades the industry has profited from la- bour arbitrage: the cost of hiring a coder in Pune, a city in western India, is a fraction of hiring one in Pasadena, a Californian suburb. It wasn’t just software engineers: call-centre and data-entry jobs were out- sourced to India, too. IT consulting firms such as Infosys and Tata Consultancy Ser- vices (TCS) derive much of their revenue by providing customers with armies of Indian coders who perform labour-intensive tasks such as maintaining software, answering support tickets and writing routine code. Now, however, there is an even cheaper alternative: an AI agent. Claude Code, a tool from Anthropic, can put together a prototype of a software application in min- utes. Making it run efficiently and securely requires deeper technical knowledge. If one skilled developer armed with Claude can do the work of several, then businesses may find themselves with less need for the coders that Infosys and TCS provide. So far, however, the predictions that the mass automation of coding will leave out- sourcing firms obsolete seem overblown. Their clients often hope AI will create huge productivity gains by, for example, using the technology to quickly and cheaply build a new internal HR tool. But such im- provements in productivity are only possi- ble in “greenfield” environments with “clean architecture”, argues Atul Soneja, chief operating officer at Tech Mahindra, an IT firm. Deploying AI in “brownfield” environments—with legacy code, a lack of documentation and multiple systems that must all continue to operate in real time— is far trickier. In the end, clients often real- ise that their AI dreams were too ambitious and end up hiring as many outsourced coders as before, say executives. What is more, the AI boom may present an opportunity for the consultancy arms of India’s outsourcers. They argue that they can now fulfil more of a strategic role for their clients: getting the most out of AI re- quires understanding all of the context around the problem, something that con- sultants with experience across businesses can offer. Nandan Nilekani, one of the founders of Infosys, reckons that such ser- vices related to AI could be worth $300bn-400bn by 2030. The bulls have data on their side. The most recent results for the outsourcers were slightly better than expected. TCS re- ported that in the three months to January AI-related sales rose by 17% on the previous quarter, making up 6% of total revenue. Headcount has fallen at TCS but risen at its competitors in recent years, despite the possibility of automation. A report by Yo- gesh Aggarwal of HSBC, a bank, notes that there are few “tangible case studies to sup- port claims of AI cannibalisation of tradi- tional software”. So-called global capability centres (GCCs) are another part of the picture. In essence, these are outsourcing arms dedi- cated to a single company, such as Lulule- mon or Wells Fargo, and employ far more of India’s tech workers than the IT consul- tants do. Their rise reflects the fact that nearly every company now sees its technol- ogy as core to its business. If companies do more of their coding in-house, aided by agentic tools, that may still benefit India’s IT industry. Many IT consultants offer ser- vices linked to GCCs, helping businesses set them up, for instance. From the moment ChatGPT made its debut in November 2022, Indian outsour- cers have been pegged as one of the sec- tors most exposed to displacement by AI. More than three years on, though, the promised disruption has not arrived. Rev- enues are growing, and hiring continues. Yet the sector nonetheless encapsulates the effect of AI on business. The technolo- gy may still upend the industry, but so far its effect is unclear and uneven. ■ BANGALORE Why AI has not yet upset outsourcing firms Claude-ophobia India, stockmarket indices, January 1st 2026=100 Source: Bloomberg 105 100 95 90 85 80 75 Mar Feb Jan Nifty IT Nifty 50 Fast fashion En vogue PEOPLE SCROLLING past Zara’s adverts on Instagram would be forgiven for confusing them with those of Chanel. For its 50th-anniversary campaign last spring the Spanish fast-fashion brand hired Ste- ven Meisel, a photographer who is known for working with luxury houses. The hair- stylist and make-up artist on the shoot were of a similar pedigree. The ads fea- tured almost every top-paid model of the past 30 years shimmying to Donna Sum- mer’s “I Feel Love”. Such glamour bespeaks a winning strat- egy for Inditex, a Spanish clothing group, which relies on Zara for about two-thirds of sales. Competition from the likes of Shein and Temu, two Chinese even-faster- fashion retailers, has driven some rivals to cut prices. But Inditex has competed on style rather than cost, says Geoff Lowery of Rothschild, a bank. On March 11th it re- ported bumper results. Annual sales grew to €40bn ($46bn) in 2025 and net income rose to a record €6.2bn, up by 6% on the previous year. Selling fast-fashion with a luxurious gloss is reaping rewards. Óscar García Maceiras, Inditex’s boss, ascribes much of the firm’s success to its half-century-old business model. Amancio Ortega, the founder, built the business around an agile logistics network that let it adjust merchandise quickly based on shoppers’ tastes. Zara and its sister brands aim to offer new items each week, some- times even twice a week. This lowers the risk that the brand produces clothes that nobody wants and has to sell them at a steep discount. It also lets Zara set high prices, because its garments can quickly reflect popular styles. When Shein and other Chinese brands entered the market in the early 2010s, they competed on speed and cost. That hurt Zara less than H&M, its big European rival, because it had a broader range of wares, in- cluding more expensive items. Zara targets shoppers in their 30s and 40s who tend to be richer than those of H&M, notes Wil- liam Woods of Bernstein, a broker. As a consequence, Inditex has surged past its competitor. In 2009 its operating profits were roughly on a par with those of H&M. Today they are almost five times bigger. Lately Zara has gone more upmarket still. In late 2021 it appointed Marta Orte- ga, the daughter of Mr Ortega, as chair. She has aimed to give consumers a taste of lux- ury. This week the brand announced a How Zara fought off H&M and Shein C002 -- 56 of 78 -- 60 The Economist March 21st 2026 Business ▸ “THIS SENTENCE is false” is an ex- ample of a logical inconsistency known as the liar paradox. If this sen- tence is true, then it is indeed false. But if this sentence is false, then it must be true. This is the kind of thing that makes philosophers go weak at the knees and gives normal people a headache. A small echo of the liar paradox can be heard in a ritual of modern manage- ment: the annual employee survey. Imag- ine being asked to react to this state- ment: “This survey is a complete waste of time.” If enough people Strongly Agree with this proposition, then it’s probably true. But if a company is the kind of place where employees are pre- pared to give such honest feedback, then isn’t it likely to be false? Employee surveys are a staple of corporate life. Knowing what workers are thinking is an important goal. High employee churn imposes financial and operational costs. There is lots of re- search to suggest that employee satisfac- tion leads to better financial outcomes. But set-piece surveys are really useful only if three conditions are met: they are properly designed, they are used in conjunction with other tools and they lead somewhere. Among other things, proper design means grappling with the problem that employees are not necessarily incentiv- ised to be honest. Faced with a Likert scale and the proposition that “My boss- es have the communication skills of a banana,” you might Strongly Agree but still opt to Neither Agree Nor Disagree on your submitted form. Promises of confidentiality and anonymity can help, but only to a point. Impression management, a fancy name for making yourself look good, can skew results on questions about things like job-safety practices. There are ways to mitigate this, however. A recent study by Emma Zaal of the University of Groning- en and her co-authors found that using different survey formulations can have a big impact on responses. In a survey of Dutch adults, which asked questions like whether they had sent text messages while driving a car, the inclusion of face-saving options such as “occasionally” or “only when no other option” elicited a very different set of answers from binary “yes” or “no” options. Employers can look at unvarnished feedback, most obviously on workplace- review sites such as GlassDoor. Artificial intelligence has the ability to build a co- herent picture out of a mass of unstruc- tured comments. In one recent paper, Tom Reader and Alex Gillespie of the London School of Economics looked for evidence of high-pressure cultures in employee reviews of European firms. Reviews that suggested very ambitious targets and expediency in reaching them were predic- tive of companies experiencing a future corporate scandal. Frequency is another aspect of good design. A lot can change in the space of a year; an annual survey is a long time to wait for an update on employee senti- ment. Retrospective evaluations are also subject to biases like the peak-end rule, which describes how people overweight the most extreme and the closing mo- ments of an experience when they recall it. In one famous experiment, Daniel Kahneman and others put volunteers through two unpleasant tasks: the first involved holding their hands in icy water for a minute, and the second for 90 seconds, though for the final 30 seconds the water’s temperature rose by a little. The first experience was objectively less painful but, given a choice, the second was the one people chose to repeat. Shorter “pulse” surveys cannot eradi- cate these problems, but are a way to gather more timely data. HappyOrNot, a Finnish company that makes those smiley-face feedback terminals you see in airports and elsewhere, also installs its machines inside companies as a way of keeping track of employee sentiment on a daily or weekly basis. Good design and multiple sources of information contribute to a successful employee survey. But nothing matters more than being seen to act on feedback. If you say that your bosses have the communication skills of a banana and then hear nothing back, you have the faint satisfaction of knowing you are right but not much else. Surveys that prompt no follow-up action deepen cynicism rather than enthusiasm. All of which leads to another para- dox. Surveys are most useful in organisa- tions that care about what their employ- ees think. But organisations that care about what their employees think often have less need for surveys. BARTLEBY Likert or not The secrets to a good employee survey partnership with John Galliano, a designer known for elaborate couture collections during stints at Dior and Maison Margiela, two luxury houses. It has also collaborated with Stefano Pilati, a former lead designer for Saint Laurent, a glitzy French fashion house. Zara has even made a foray into ce- lebrity styling, dressing Bad Bunny, a Puer- to Rican singer, for his Super Bowl halftime show in February. The shift means Zara is increasingly fo- cused on the affluent parts of the world. Last year two-thirds of its parent’s sales came from Europe (Inditex does not break out Zara’s regional revenue). The brand has reduced the number of its shops by a fifth in the past three years, halving its number of locations in China, where shoppers have been gloomy. And it shut operations in Russia when the war with Ukraine began. But the remaining shops are larger and posher. From 2022 to 2025 Inditex’s sales per square metre of store footage in- creased by 46%, says Deutsche Bank. Some shops boast separate boutique-like areas for handbags and shoes, similar to ones found in high-end department stores. The experience of shopping at Zara is changing, too. Many customers are looking for “something that goes beyond the pure transaction of garments”, says Mr García Maceiras. His stores have introduced self- service checkouts to free staff to act as per- sonal shoppers. Such pampering will please Zara’s shoppers, who are slowly get- ting used to a touch of glamour. ■ C002 -- 57 of 78 -- 61 The Economist March 21st 2026 Business Mainstream maverick MANAGERS GET up to all sorts when shareholders aren’t pay- ing attention. Many hoard assets. Some even commit fraud. And very rarely one will hire Katy Perry to perform on a cruise ship. When they do, the job of reimposing capitalism’s Protestant ethic falls to Elliott Management, a hedge fund based in West Palm Beach, Florida. In February Elliott denounced the largesse of Norwegian Cruise Line, which had hired Ms Perry to christen a new vessel, and demanded the replacement of its board. It is push- ing for a new boss at Lululemon, which makes leggings, and has just squeezed Toyota to pay more for a supplier in which the Japa- nese carmaker (and Elliott) hold minority stakes. Pepsi said recently that it would cut a fifth of its products. Naturally, the Co- ca-Cola of shareholder activism was again involved. When a company slips, Elliott is rarely far behind. Paul Singer opened the shop in 1977 to trade convertible bonds but became famous in the 1990s as an obstinate lender to emerging markets. Back then Elliott bought distressed bonds owed by countries like Peru and Argentina before demanding to be paid in full. Now most of its efforts go into shareholder activism: buying small stakes in companies, lobbying for change and hoping the share prices rise. Often boards co-operate. Ones that don’t risk a public war of words—and charts which show what a terrible job they are doing. (The history of shareholder activism is also the history of media, the industry’s distant and less moneyed cousin. Cam- paigns nowadays often involve podcasts and videos.) Elliott has industrialised what had been an artisanal business: telling bosses they are wrong. “There’s Elliott and then there’s everyone else. It’s two separate industries at this point,” says a banker who advises companies caught in the fund’s sights. Carl Icahn, who made his name as a corporate raider in the 1980s, is less busy than he used to be (though, at 90, he recently tried to buy Caesars Entertainment, a casino operator). Bill Ackman, Mr Icahn’s nemesis, is most focused on his dream of becoming War- ren Buffett. According to regulatory disclosures ValueAct, Star- board Value, Third Point and Trian, four big activist funds, togeth- er own $24bn of American stocks and have pursued 37 public ac- tivism campaigns since the start of 2024—about the same as El- liott alone on both measures. Elliott, which also does private-equity deals, employs more than twice as many invest- ment and research staff as the others combined. A decade ago the reaction of boards when Elliott appeared on their shareholder register was pure terror. Today it is mere anxiety. One reason is the legions of financial and legal advisers compa- nies employ to ponder their firms as an activist might. Another is that activists’ demands are rarely all that surprising. Returning capital to shareholders is a common ask. So are asset sales: simpli- fication remains the idée fixe of the shareholder activist. Smiths, a British engineering group, sold two divisions last year after Elliott bought a stake. Honeywell, which will break up later this year, was considering doing so even before Elliott told it to. There is a fundamental irony to the idea of a mainstream con- trarian. Shareholder activists and private-equity investors often approach companies with similar demands for changes to costs and a firm’s capital structure. These ideas have been dominant in boardrooms for decades. So how can it still be profitable to im- pose them on corporate America? There is only a finite number of unwieldy industrial conglomerates to break up, after all. One argument is that the dominance of public markets by giant, passive investment firms such as BlackRock and Vanguard necessitates a similarly massive activist to stand up for share- holders’ interests. A more cynical view is that it is impossible to ever fully align the interests of the shareholders, who own firms, and the managers, who control them. Of all the external checks on executive power—bank research analysts, proxy advisers, newspa- pers—hedge funds with money on the line have the strongest in- centives to actually increase the value of a firm. Activists say perpetual change in business is their surest guar- antee of continued success. There is plenty of that. American cap- italism is going through a corporate-governance revolution at least as radical as the one that began with junk bonds in the 1980s and birthed modern private equity and shareholder activism. Its two faces are the state capitalism of Donald Trump, who has liber- ally taken stakes in private companies and bossed them around as an activist might, and artificial intelligence, whose leading firms have created their own complex, and occasionally ridiculous, go- vernance arrangements. Yet neither innovation has yet sparked a major activist campaign. Where were the guardians of share- holder rights when Intel handed over 10% of its stock to America’s government? Or now that big tech firms are spinning a complex web of AI-related cross-holdings? Gone east The reinvention of American governance does not preclude its en- thusiastic export abroad by activist investors. Britain, with its clubbable boards and tired stockmarket, is an obvious target. Two of Elliott’s recent investments are in BP, a chronically mismanaged energy firm, and the parent company of London’s stock exchange. But it is Japan where American activists spend more of their time, aided by regulatory reforms pressing companies to unwind their cross-holdings (which are even more complicated than the ones being assembled in Silicon Valley). According to Barclays, a bank, 56 campaigns were launched against Japanese companies last year, the most on record. Since 2023 ValueAct has launched more campaigns there than in America. Elliott announced three last year and on March 17th disclosed a stake in Mitsui OSK, a shipping company. It should check Ms Perry isn’t on the payroll. ■ SCHUMPETER Elliott Management has industrialised shareholder activism C002 -- 58 of 78 -- 63 The Economist March 21st 2026 Finance & economics The American economy Disunited petrostates of America FOR AMERICANS of a certain age, and macroeconomists of all ages, the 1970s carry a lingering trauma. Then as now, pet- rol prices spiked after tumult in the Middle East. Inflation soared; growth slumped. Cars queued at parched petrol stations and the ugly word “stagflation” entered the ver- nacular. The parallels to Donald Trump’s war in Iran hardly need drawing. Nearly three weeks after American and Israeli bombs started falling on Tehran, oil prices are up by half and the Strait of Hormuz, through which a fifth of the world’s crude normally passes, is all but shut. For all the historical rhymes, that era is not an ideal guide to the present day. The shale-fracking revolution ignited in the 2010s turned America from a net importer of energy to a net exporter by 2019, for the first time in more than 60 years (see chart 1 on next page). In recent years American liquefied natural gas (LNG) has started supplying global markets, too. Uncle Sam now ships lots of both oil and gas abroad. Before the war Europe was getting more than half its LNG from across the Atlantic. At regasification terminals around the con- tinent, European pain is transmuted into American profit. Still, unlike a proper petrostate, Ameri- ca will not emerge from the crisis as an outright winner. For its highly diversified economy, a sudden shortfall in the fuel that powers nearly every car, lorry and aeroplane will deal a blow. Goldman Sachs, a bank, reckons the war in Iran will nudge American GDP growth this year down by 0.3 percentage points to 2.2%. More importantly, the aggregate figure conceals huge disparity of outcomes for different constituencies. The shock is al- ready reshuffling American prosperity: from coasts to the oil patch, from airlines to the energy majors and, most significant- ly, from the poor to the rich. Each of those shifts will cause palpable economic and political reverberations. Take the 50 states. American GDP growth slowed after the last big oil shock, when Russia’s invasion of Ukraine in 2022 roughly coincided with the Federal Re- serve’s sharp increases in interest rates to fight stubborn post-pandemic inflation. Most states’ output braked. But Texas hit the gas. So did Alaska, New Mexico and a clutch of other places with fossil-fuel econ- omies (see chart 2, left panel). The gap may be wider this time. Wind- fall profits generated by energy firms in 2022 and 2023 helped cause another wave of investment in hydrocarbon production, which can now be put to use. America’s LNG export capacity, much of it in Texas and Louisiana, is a third larger than it was then and is set to grow by another 10% or so by the end of the year. Oil production has risen by half in the past decade. WASHINGTON, DC The world’s economic giant can shrug off an oil shock. Can its citizens? → ALSO IN THIS SECTION 64 Can America ban energy exports? 65 The hit to China… 66 …and the poor world 67 The other commodity shocks 69 Buttonwood: Is KOSPI kaput? 70 Free Exchange: Sex economics ⏩ C002 -- 59 of 78 -- 64 The Economist March 21st 2026 Finance & economics ▸ ⏩ The effect on American businesses will be similarly lopsided. The benchmark S&P 500 index of large American firms is down by almost 4% since war broke out. Of the 11 large sectors, ten have declined (by any- where between 1%, for information tech- nology, and 10%, for materials). The energy sector, by contrast, has gained more than 4%; its second-biggest firm, Chevron, is up by 6% (chart 2, right panel). Even America’s technology giants, which have been fuelling the S&P 500’s re- lentless rise, are not invulnerable. In the past few years they have moved out of the ethereal digital realm and into the physical world of power-hungry artificial-intelli- gence data centres. Sky-high energy prices could imperil those AI clouds. Data cen- tres’ putative effect on electricity costs has become a flashpoint for political opposi- tion. If power prices soar, local govern- ments will surely be less willing to risk the ire of bill-sensitive constituents than deep- pocketed tech bosses. Shocking results If investors are spooked by the prospect of prolonged Hormuz disruption, this would result in an even bigger wealth transfer to energy firms’ shareholders. A big sell-off could dent overall growth, which has been fuelled in part by stockmarket gains that have made many Americans feel better off and readier to spend. It could also gum up hundreds of billions of dollars in planned AI investments, which have been helping to lift the economy in recent quarters. The most profound intra-American re- distribution will occur between the less af- fluent and the loaded. The lowest-earning fifth of Americans devote nearly twice as much of their spending to petrol and elec- tricity as the top-earning fifth. Whereas the rich can absorb the shock, poorer Americans must cut back purchases of other things in order to fill up their cars and pay their power bills. The longer they do so, the bigger the hit to their welfare. Adding insult to injury, the extra cash they spend on petrol and power goes via oil firms’ income statements into the pockets of the share-owning class. Worse still, the oil shock is colliding with an economy that, fairly or not, Amer- icans already hate. Although the country is nowhere near a recession, consumer confi- dence languished near record lows even before the energy crisis. The Democratic Party was already taking Mr Trump’s Re- publicans to task over the “affordability crisis” which has been angering voters de- spite the fact that their wages have been growing faster than prices. If the oil shock turns these misperceptions into reality, the backlash could be fiercer—especially if it is compounded by rises in interest rates by the Fed, should it fear that inflation was once again getting out of hand. Least popular of all will be the rise in petrol prices, which glare down at Ameri- cans whenever they pass a service station. Neale Mahoney, Ryan Cummings and Gia- como Fraccaroli, a trio of economists at Stanford University, find that once prices pass $3.50 per gallon, media interest in the topic explodes (see chart 3). They are alrea- dy nearly $4, up from less than $3 before the war. If the Strait of Hormuz stays shut and oil prices jump again, $5 is not out of the question. In the past week Mr Trump and other Republicans have tried arguing that the energy shock is good for America now that the country is a net fuel exporter. Such as- surances will do little to mollify voters if they are still paying through the nose be- fore the midterms in November. Research shows that pre-election pric- es at the pump are strongly correlated with the performance of the party in power at the ballot box. This time expensive petrol would rile up an electorate already furious about the cost of just about everything else. The war’s clearest winners may well be neither America nor Iran, but an unlike- ly pairing of oil companies and congressio- nal Democrats. ■ Saudi America US, energy trade balance, quadrillion BTUs* Source: EIA *British thermal units †Estimate  15 0 -15 -30 25† 10 2000 90 80 70 60 1950 Biomass and electricity Oil Natural gas Coal Oil-fired Sources: Bureau of Economic Analysis; Bloomberg; SEC; company reports; The Economist The Economist The E *GDP-weighted †AK, LA, ND, NM, OK, TX, WV and WY (13% of total GDP) ‡Estimate based on industry mix, transformed axis  15 10 5 0 -5 -10 25 20 15 10 2006 US, average GDP, % change on a year earlier* Net oil share of output, %‡ S&P 500, Mar 17th 2026 Circle size=market capitalisation Share price, % change on Feb 27th 2026 30 15 0 -15 -30 Other Energy-producing states† -20 -5 -2 -1 0 1 2 5 20 80 Chevron Chevron Chevron Chevron Chevron Chevron Chevron Chevron Chevron Chevron Nvidia Nvidia Nvidia Nvidia Nvidia Nvidia Nvidia Nvidia Nvidia UUPS PS PS Apple Apple Apple Apple Apple Apple United United United United United United United United United Airlines Airlines Airlines Airlines Airlines Airlines Airlines Airlines Airlines Burning issue US, 2004-23 Source: R. Cummings, G. Fraccaroli and N. Mahoney, 2024 *Transcripts from six major TV news outlets  0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 5. Average gasoline price, $ per gallon Gasoline prices mentioned on TV, % of transcripts* 30 20 10 0 At Mar 16th Pre-Iran war Energy prices Terminal solution DONALD TRUMP is running out of options to cushion the energy shock from the Iran war. The American president has tried to press allies into assembling naval escorts, overseen the largest-ever release of strategic oil stocks and toyed with selling oil futures to drive prices down. None of it is working: the price of Brent crude, the global benchmark, is above $110 a barrel. That has pushed aver- age petrol prices to nearly $4 a gallon in America, from $2.90 on February 27th. There is one thing Mr Trump has yet to try: suspending oil exports. Insiders say this is not yet on the table. But Brent could hit $120 by the end of March, buoying pet- rol towards $4.50 a gallon—months before the midterm elections. So the temptation to keep supplies at home will only grow. What happens if the world’s third-largest oil exporter stops exporting depends on what any restrictions would cover: crude, refined products or both. What if America decided to ban oil exports? C002 -- 60 of 78 -- 65 The Economist March 21st 2026 Finance & economics ▸ ⏩ A crude-export ban would trap 4m barrels per day (b/d) from America—9% of global seaborne flows—creating a vast do- mestic surplus while squeezing America’s main buyers: Europe and Asia. That would drive a huge wedge between West Texas Intermediate, the American price bench- mark, and Brent, dislocating global oil markets, says Janiv Shah of Rystad Energy, a consultancy. It would also present American refiners with a lot of cheap feedstock. It would not be their preferred kind: their refineries are best suited to “heavy” (viscous), “sour” (high-sulphur) Latin American crude, which yields plenty of diesel and jet fuel, rather than light, sweet domestic stuff, which yields more petrol. But with fat mar- gins on offer, they should easily recoup the cost of any adjustments through exports of refined products. The domestic market for petrol could be flooded, bringing down prices at the pump. Not for long, however—any excess pet- rol would quickly be shipped abroad. Meanwhile America would find itself short of the diesel and jet fuel it normally gets from processing heavy crude, forcing it to compete for ultra-scarce global supply. Prices for these would surge. A ban on product exports alone would do little better. Swathes of Latin America, which receives most of America’s 2.7m b/d of fuel exports, would quickly face short- ages. Europe, already lacking diesel from the Gulf, would be doubly squeezed. Within America, prices would be se- verely distorted. The Midwest and the Gulf coast, home to most of the country’s refin- eries, would enjoy cheaper fuel. But the populous east coast relies on gasoline sup- plies from Europe, while the Pacific coast, which is not linked to the national pipeline network, usually imports from Asia and the Middle East. In both regions prices would stay high, especially if trading part- ners retaliate with their own export bans. Keeping them supplied would mean ferry- ing vast volumes by sea—pushing freight costs, already eye-watering, even higher. The margins of domestic refiners would be crushed by rising crude costs and depressed product prices. Most would cut output within weeks, reckons Michael Haigh of Société Générale, a French bank, dampening the price benefit. Banning crude and product exports might protect their profits. But it would strangle the world economy, which would boomerang back to America. Worse, it would destroy the country’s reputation as a reliable supplier, deterring investment in its oil-and-gas industry, says Bob McNally, a former energy adviser to President George W. Bush. In 2020 America became a net petroleum exporter for the first time since the 1940s. It is within Mr Trump’s means to ruin that achievement. ■ The Chinese economy Green, brown and red HONG KONG Despite renewables and reserves, China cannot escape the energy shock THE COASTAL Chinese city of Zhuhai is linked to Hong Kong by a showy piece of infrastructure: a 55km (34-mile) bridge and tunnel, the largest sea crossing of its kind. Some Hong Kongers use it to visit Chimelong Ocean Kingdom, a theme park featuring a whale shark, rollercoasters and a hotel shaped like a spaceship. Others are motorists with a more mundane purpose. They travel to Zhuhai to fill up their tanks with petrol, available at a big-enough dis- count to make the drive worthwhile. The mainland’s petrol-price formula smooths out the international market’s ups and downs. As such, it is one of the ways China’s government is shielding citizens from the effects of the war in Iran, which has trapped oil tankers on either side of the Strait of Hormuz and damaged energy in- frastructure in the Gulf. There are plenty more. As an emergen- cy measure, China’s planning agency has banned exports of refined products includ- ing petrol, diesel and jet fuel. The coun- try’s small, independent “teapot” refiners, clustered in Shandong province, are busy processing Iranian crude, which is still al- lowed to pass through the strait. And if the war drags on, China may also dip into its vast strategic reserve of oil, which it diligently topped up when oil prices were low last year. “This is China’s nightmare,” said Lindsey Graham, an American senator, earlier this month. But precisely because China’s vulnerability to an energy shock haunts its leaders, they have taken steps to mitigate it. China’s exposure is a result of its gar- gantuan appetite. The country produces more oil than Kuwait or the United Arab Emirates (UAE); including petrol and other refined liquids, it also outproduces Iraq. The problem is that China also consumes more energy than America, Russia and India combined—an amount that dwarfs its domestic output. Black marks Coal, which runs in thick seams across the northern provinces of Shanxi, Shaanxi and Inner Mongolia, provides most of that energy. Renewables like wind and solar power represent a fast-growing share. But oil still produces more than 18% of the total (see chart on next page). Despite China’s own respectable crude production, it relies on oil imports for about 13-14% of its ener- gy needs. More than half of these come from the Middle East. Much of this is now stuck. The war has Correction In “The welfare states of America” (February 28th) we said that weekly unemployment benefits in Massachusetts were six times those paid out by New Jersey. That was an exaggeration. Massachusetts is in fact twice as generous. Sorry. C002 -- 61 of 78 -- 66 The Economist March 21st 2026 Finance & economics ▸ ⏩ snarled up Hormuz, the narrow waterway separating Iran from the UAE and Oman, through which about 15m barrels of crude per day used to travel. Shipments from Iran’s neighbours have slowed to a trickle. Meanwhile, much of the oil Saudi Ara- bia is frantically piping to its west coast, in order to avoid the strait, does not suit China’s refiners. And Russian crude was promptly bought by India after America gave its blessing, suspending the tariff threat it previously brandished to discour- age such purchases. China does, however, have some advan- tages, including a handy source of supply that is off limits to many others: Iran itself. An average of about 1.3m-1.4m barrels per day of Iranian oil have been able to pass through the strait this month, according to Kpler, a data firm. That is roughly 90% of the pre-war amount. Most of this is des- tined for China. The country’s national oil companies do not dare touch the stuff for fear of Western sanctions which would cut them off from the dollar-centric global financial system. But the tiny teapots, which collec- tively account for about a quarter of China’s output, are happy to take Iranian oil, often paying in yuan, according to Muyu Xu of Kpler. Some of the teapots seem surprisingly sanguine about the next few weeks. The turmoil has tempted them to raise prices for their refined products, even as they work through cheap crude inputs bought before the war. “We’re…aiming to reap profits in the month of March for the whole of 2026,” a teapot official recently told Reuters, a news agency. But that assumes buyers will be willing to pay the higher prices they are now charging. As well as Iranian crude, China can tap its own vast stockpiles. They are thought to cover about 120 days of import demand, once inventories held by state-owned enterprises and refiners are added to the government’s strategic reserve. In the meantime, the authorities have banned ex- ports of refined fuel products. It has also stuck to a formula estab- lished in 2016, which adjusts retail prices only gradually and freezes them altogether if the global benchmark exceeds $130 per barrel. When the cost of crude surged from April 2020 to June 2022, the formula passed only about three-quarters of the in- crease, according to researchers at the World Bank. On March 9th China raised the price caps on petrol by 695 yuan ($100) per tonne. This translated into a 7.8% rise in Guangdong province, where Zhuhai is located. Prices in Hong Kong are almost 50% higher. Still, China cannot shield its economy entirely. Higher prices will raise freight charges and ripple through supply chains, increasing the cost of many chemicals, plastics and synthetic rubber. If the oil price averages even $85 a barrel this year (and it is currently above $110), it could shave 0.3 percentage points from growth in China’s industrial production, according to Shenwan Hongyuan, a securities firm. Goldman Sachs has already cut its GDP growth forecast for this year by 0.1 per- centage points to 4.7%, although the bank made more substantial cuts to its forecasts for India (0.5 points), South-East Asia (0.4) and Japan (0.3). In the long run, chaos in the Middle East might hasten worldwide adoption of electric vehicles, as welcome as solar and wind power, all of which China supplies in abundance. Countries may choose to turn away from fossil fuels not because these are dirty but because so much of the sup- ply comes from such a dangerous region. In the past countries have worried about the “China squeeze”, fearing that China might bully or manipulate countries that depend on its suppliers. After recent events in the Gulf, however, energy-inse- cure places may see dependence on China as the lesser evil. Better to be squeezed than straitened. ■ Pits and panels China, energy consumption by source, % Sources: National Bureau of Statistics; Wind 100 75 50 25 0 24 20 15 10 05 2000 Oil Gas Nuclear and renewables Coal Emerging economies The darkest hours ACROSS THE poor world, the third Gulf war has set off a scramble for energy. In Nepal, long queues for cooking gas have forced rationing. In Sri Lanka, firms have been urged to shut on Wednesdays to con- serve fuel. In Pakistan, schools have been closed and universities moved online. Households and governments are prepar- ing for what the head of the IMF, Kristalina Georgieva, has called “the unthinkable”. The unthinkable has, in fact, happened before. When global energy supply is squeezed, the poorest suffer most. The pattern was clear after Russia’s invasion of Ukraine in 2022. As Europe subsidised en- ergy to shield households, demand held up and prices stayed higher for longer, shift- ing the burden onto importers with fewer reserves and less fiscal space. The result was crisis. Sri Lanka, already under severe financial strain, exhausted its foreign-ex- change reserves and defaulted. Pakistan, facing a similar squeeze, slid into a bal- ance-of-payments crisis, turned to the IMF and slashed imports. With the Strait of Hormuz all but closed, the latest hit could be worse. Which places are most vulnerable to a macroeconomic crisis? To answer this, we have compiled data on two dimensions: exposure to the shock and capacity to ab- sorb it. The first captures countries’ reli- ance on imported energy and Gulf-linked flows; the second reflects their financial buffers. Combining the two yields a rank- ing of the emerging markets most at risk (see table below and chart on next page). Jordan is badly exposed and thinly buf- fered, though its ties to Western allies and Gulf donors make it a candidate for emer- gency support. Pakistan and Egypt are also Which country is the biggest loser from the oil shock? *Out of 15 countries. Three indicators not shown: oil and gas imports from the Middle East, Gulf remittances, external government debt †Estimate Sources: UN; World Bank; IMF; national statistics; The Economist Fuel gauge Emerging markets most vulnerable to Iran war oil shock, 2024 or latest Ranking* Foreign-exchange reserves, months of imports Net oil and gas imports, % of GDP  Jordan ˆ.‰ Š.‹  Pakistan Œ.Œ Œ.Œ Ž.‹  Sri Lanka ‰.Ž ‰.Ž Ž.‘ = Egypt Ž.‘ Œ.ˆ Ž.‘ Œ.ˆ Ž.‘ Œ.ˆ = Ethiopia ’.Š ’.Š ’.‹
Nepal “.‹ ’”.Œ  Bangladesh Ž.Ž† ‰.Ž Ž.Ž† ‰.Ž Ž.Ž† ‰.Ž  Thailand Š.‰ Š.ˆ  Philippines ‰.ˆ ‰.ˆ Š.‰  India Ž.‹ Š.ˆ Ž.‹ Š.ˆ Ž.‹ Š.ˆ C002 -- 62 of 78 -- 67 The Economist March 21st 2026 Finance & economics ▸ ⏩ high on both lists. Pakistan spends some 4% of GDP on oil and gas imports, sourcing nearly 90% from the Middle East; Egypt spends about 3% of GDP and gets nearly half its supplies from the region. Both also depend heavily on remittances from the Gulf, worth around 5-6% of GDP, which could fall if the war disrupts labour mar- kets or forces workers to return home. As energy prices rise, import bills swell just as remittance inflows come under pressure—widening current-account defi- cits and putting currencies under strain. A weaker currency, in turn, makes dollar-de- nominated oil dearer still. The dollars to cover those wider deficits must come from somewhere: reserves, foreign borrowing or cuts to other imports. Yet in Pakistan and Egypt, buffers are limited. Pakistan’s reserves cover less than three months of imports, below the IMF’s recom- mended minimum. Egypt, despite recent external support, still carries a gargantuan external debt burden. Around $29bn is due this year—more than half its foreign-ex- change reserves. This limits its ability to absorb another shock. As financing condi- tions tighten and capital flows reverse— global investors are already pulling money from emerging-market debt funds—a higher fuel bill can quickly tip into a bal- ance-of-payments crisis. Bangladesh and Sri Lanka also look vul- nerable despite only middling exposure. Bangladesh’s reserves barely cover three months of imports and it is already on an IMF programme. Its garment factories— the backbone of its export economy—run on imported fuel, so higher energy costs worsen the trade balance from both sides. Sri Lanka is in a similar position. It only re- cently emerged from its default in 2022, triggered in part by that earlier energy shock, and its buffers remain thin. Other countries are highly exposed but better placed to weather the shock. Thai- land spends about 7% of GDP on oil and gas imports—more than any country in our sample—yet holds nearly 100 days of im- ports in strategic oil reserves and more than seven months of import cover in for- eign exchange. These buffers should buy time. Nepal stands out for its reliance on remittances. A staggering 8% of GDP comes from workers in the Gulf, according to the most recent World Bank estimates, and it has little oil stashed away. But it holds plenty of hard currency. India should be able to cope. It spends about 3% of GDP on energy from abroad and gets roughly half from the Middle East (cooking gas is already in short supply). But its buffers are strong. Foreign reserves cover about seven months’ imports; offi- cial and commercial oil stocks would last 70 days or so. It can also shift away from the Gulf. Its refineries are set up to process lower-quality crude, allowing it to take in Russian oil that many others cannot. And unlike much of Asia, India generates little electricity from imported gas, favouring local coal. So it avoids a big way higher en- ergy prices feed through to the economy. Even if countries avoid a macroeco- nomic crisis, the humanitarian toll could still be severe. Nitrogen fertiliser, made from natural gas, is becoming more expen- sive, raising the cost of food production across poor countries (see next article). The World Food Programme warned this week that the number of people facing acute hunger could reach record levels in 2026 if the conflict does not end soon. Sta- bilising currencies and financing imports may avert a financial crisis. Keeping food affordable is another matter. ■ The insulated and the isolated Emerging markets, exposure and resilience to Iran war oil shock 2024 or latest *Based on foreign-exchange reserves and external government debt †Based on net oil and gas imports, oil and gas imports from the Middle East and Gulf remittances Sources: UN; World Bank; IMF; national statistics; The Economist The Economist The E 1.5 1.0 0.5 0 -0.5 -1.0 -1.5 Exposure score† Resilience score* 1.5 1.0 0.5 0 -0.5 -1.0 -1.5 Jordan Jordan Jordan Jordan Jordan Jordan Jordan Pakistan Pakistan Pakistan Pakistan Pakistan Pakistan Pakistan Pakistan Pakistan Egypt Egypt Egypt Egypt Egypt Egypt Ethiopia Ethiopia Ethiopia Ethiopia Ethiopia Ethiopia Ethiopia Ethiopia Ethiopia Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Sri Lanka Kenya Kenya Kenya Kenya Kenya Kenya Nepal Nepal Nepal Nepal Nepal Nepal Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh Bangladesh South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa South Africa Philippines Philippines Philippines Philippines Philippines Philippines Philippines Philippines Philippines Philippines Philippines Philippines Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand Thailand India India India India India Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam Vietnam Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Indonesia Turkey Turkey Turkey Turkey Turkey Turkey Turkey High exposure, weak buffers Low exposure, weak buffers High exposure, strong buffers Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, Low exposure, str str str strong buffers ong buffers ong buffers ong buffers ong buffers ong buffers ong buffers ong buffers ong buffers ong buffers The other commodity crises Scattershock SINCE THE third Gulf war began three weeks ago one number has captured the world’s attention: the price of crude. On March 19th Brent, the global benchmark, briefly surpassed $115 a barrel—higher than its average of 2022, the year Russia launched its full-scale invasion of Ukraine. Some 10-15% of global oil supply remains trapped behind the Strait of Hormuz. But oil is not the only commodity stuck there. So are plenty of others. The Gulf states, it is rapidly becoming clear, matter for the supply of much more than fossil fuel. Their vast hydrocarbon reserves make them ideal locations for firms that process raw materials. It also helps that they are sit- uated between fast-growing Asia and wealthy Europe. And so 22% of the world’s traded urea, 24% of its aluminium, a third of its helium and 45% of its sulphur come from the region. As drones hit plants and the Hormuz blockade strands exports, such crucial supply chains are experienc- ing an almighty crunch. Three industries— transport, manufacturing and food pro- duction—are already suffering. And the damage looks set only to grow. Take transport, and the refined pro- ducts on which it relies, first. The near-dis- appearance of Gulf crude has caused Asian refiners acute problems. As well as being far dearer, alternative supplies are lighter and lower in sulphur than their plants were built to process. This increases refiners’ operating costs, can damage their equip- ment and yields less diesel and jet fuel— the scarcest products right now. Margins have collapsed, prompting processing cuts of 5-15% in China, India, Japan and Thai- land, and more elsewhere. The Iran war is roiling markets far beyond oil Catching fire Singapore, refined oil products, $ per barrel Source: Argus Media 250 200 150 100 50 2026 Mar Feb Jan Bunker fuel Diesel Jet fuel Petrol Naphtha C002 -- 63 of 78 -- 68 The Economist March 21st 2026 Finance & economics ▸ ⏩ Meanwhile Gulf refineries, among the world’s largest, have barely shipped any- thing since late February. The little oil re- routed via pipelines in Saudi Arabia and the United Arab Emirates (UAE) is unre- fined. So is the cargo carried by the few tankers that have dared to traverse the strait. Vortexa, a ship-tracker, estimates that 125 product tankers, or 5% of the glo- bal fleet, are trapped in the Gulf. That double whammy has alarmed China into suspending all refined-product exports—turbocharging prices of petrol, diesel and jet fuel in Singapore, Asia’s oil- trading hub (see chart 1 on previous page). Europe is feeling the squeeze, too: last year it sourced 69% of its jet-fuel imports from the Gulf or Asia. The cost of shipping fuel is going through the roof everywhere. The crunch will get worse before it gets better. Modelling by Michelle Brouhard of Kpler, a data firm, suggests that if Hormuz stays blocked, Oceania will have burned through 80% of its jet-fuel stocks within 36 days and Africa within 23. Asian countries outside China, Japan and South Korea will be critically short of petrol in 12 days. Many poorer places are already closing schools, shortening working weeks and ra- tioning fuel. Even a swift reopening of Hormuz would not restore normality quickly, owing to refinery damage, shat- tered infrastructure and shippers’ reluc- tance to return to the Gulf. Manufacturing is the second industry under severe strain, because of its reliance on the Gulf’s petrochemical plants, which are largely unable to export their wares. The region accounts for nearly 45% of glo- bal seaborne naphtha flows and 23-30% of exports of other key plastic inputs, includ- ing styrene and polyethylene. Several Asian plastic-makers have already declared force majeure, meaning they are unable to fulfil contracts owing to factors beyond their control. The active compounds in most drugs, from aspirin to antibiotics, also require petrochemicals. China imports large vol- umes of petrochemical feedstocks from the Gulf. India, the world’s largest maker of generic drugs, is exposed, too. In addition, the Gulf supplies 26% of the world’s indus- trial diamonds (essential for cutting and drilling tools), 26% of its glycol (a paint in- gredient) and 30% of its methanol (used in plastics, resins, chemicals production and building materials). Most striking has been the impact on aluminium, which is used for packaging, transport, power grids and renewable ener- gy. Qatar’s mega-smelter is short of gas, while plants in Bahrain and the UAE can- not export. All depend on imported raw materials they are no longer receiving. Al- though Oman exports aluminium from a port lying outside the strait, it is under at- tack and shipping costs are soaring. As a consequence, the price on the Lon- don Metal Exchange for aluminium deli- vered in three months’ time is up by $300, to $3,440 a tonne—near its highest in four years. Distress is greatest in the regions that are most dependent on Gulf supplies: Europe, where they account for 14% of im- ports, and America, where they make up 21%. Delivery premiums for both have hit records (see chart 2). Iran is also a significant supplier of semi-finished steel, meaning billets and slabs, to Asia. As exports have fallen, prices for crucial grades have leapt. Lora Stoyan- ova of Argus Media, a price-reporting agency, notes that the crunch has even made slab, an intermediate product, dearer than hot-rolled coil, the finished stuff. It is as if a raw lump of dough has become cost- lier than a baked loaf of bread. Perhaps the most unexpected industri- al casualty is helium, a gas that is essential for cooling the supermagnets used to make semiconductor chips, and which is a by- product of liquefied natural gas (LNG). Qa- tar produced 17 tonnes of helium per day— roughly a third of global supply—at Ras Laffan, the megacomplex that until the war made and shipped nearly a fifth of the world’s LNG. Now, however, Ras Laffan has shut down, and there are no ready sub- stitutes for helium. Even more ominous is the threat to glo- bal food production, the third industry se- verely affected by the war. The United Na- tions estimates that a third of global sea- borne fertiliser trade passes through Hor- muz. Roughly two-thirds of this is urea (often produced from natural gas); most of the rest is phosphate. Poor countries will be hit hardest: Kenya, Pakistan, Somalia, Sri Lanka and Tanzania each get more than a quarter of their fertiliser from the Gulf. For Sudan, the share rises to over half. Prices are already moving sharply. That of urea is up by 35% since the start of the war (see chart 3). The fertiliser was expen- sive to start with: over the past three months, prices for deliveries to America have surged by over 70%. Sulphur, another plant nutrient, is also in short supply. Prices have risen by 40% The situation stinks Unanchored Sources: Argus Media; Platts *Cost of physical delivery to location  2.5 2.0 1.5 1.0 0.5 0 2024 25 26 Aluminium, regional price premiums*, $’000 per tonne Europe (Rotterdam) US Midwest 750 500 250 0 2025 2026 Middle East, fertiliser prices, $ per tonne Sulphur Urea C002 -- 64 of 78 -- 69 The Economist March 21st 2026 Finance & economics ▸ IN HIS VICTORIOUS campaign for South Korea’s presidency last spring, Lee Jae-myung ran on the promise of “KOSPI 5,000”. As election pledges go, it was admirably specific. It also seemed like a long shot. At the time the country’s benchmark stockmarket index stood at half that, down from a peak of 3,300 or so in 2021. Yet by late January, less than eight months into his tenure, Mr Lee had kept his word. Within another month the KOSPI had burst through 6,000, making the slogan look unambitious. In the 12 months to the end of February the index rose by 138%, leaving all the world’s notable bourses in the dust. Nothing could stand in its way. Except, that is, an energy shock. In the two trading days after America and Israel attacked Iran the KOSPI plunged by nearly a fifth, now outdoing other major indices on the way down. As a big energy importer, South Korea suffers whenever oil and natural-gas prices rise. With its habitual suppliers in the Gulf paralysed by war, the government has vowed to increase output at coal-fired power plants and cap prices for consum- ers. Foreign investors had already been cashing out before the war; big domestic ones have started joining in the sell-off. So is the KOSPI bull run kaput? The relentless rally of the past 12 months was unusual by South Korean standards. The index had moved side- ways for much of the previous decade (the global post-pandemic boom in 2021 aside). Its constituents were concentrat- ed in stodgy export industries, such as carmaking, shipbuilding, armsmaking and consumer electronics. Many of them were being disrupted by cut-price Chi- nese competition. And they typically belonged to sprawling and opaque chae- bol (family-controlled conglomerates). The result was a lacklustre return on equity and a persistent “Korea discount” on KOSPI stocks. At the start of 2025 the index traded at a price-to-earnings ratio of just ten, compared with 15 for Japan’s TOPIX (which shares some of the same characteristics) and 25 for the S&P 500, the American blue-chip benchmark (which does not). Investors’ enthusiasm for K-stocks over the past year can be explained by flaws suddenly turning into virtues. South Kore- an balance-sheets (heavy on assets) and products (low on obsolescence) typify the hot “HALO” trade. KOSPI firms’ capital intensity was seen as inefficient in a world being eaten by software. It is in vogue as companies are racing to build artificial- intelligence infrastructure, defence bud- gets are ballooning and the West and China are decoupling in critical products from EV batteries to LNG tankers. These trends are still playing out. That explains why, despite the Iran-induced hiccup, the KOSPI has not reneged on Mr Lee’s campaign pledge. It also implies that South Korean stocks still have room to rise. Those rises are, though, likely to become choppier. One reason is the KOSPI’s increasing concentration. Just two companies, Samsung Electronics and SK Hynix, account for two-fifths of its market value, up from about a sixth as recently as early 2025, and for more than two- thirds of its one-year returns. It is their soaring profits from memory chips, currently selling like Seoul’s hotteok hotcakes thanks to the AI boom, that have propelled the KOSPI to its heady heights. And these profits are prone to booms and busts like the rest of the semiconductor industry. Second, the South Korean stockmark- et has become more popular with do- mestic retail traders. The number of active trading accounts and their users’ deposit balances with brokers have both mushroomed. Many are funding their bets with borrowed money. Margin lending, in which investors use loans from brokers, hit a record 34trn won ($23bn) in early March, up from 18trn won the year before. Offshore leveraged exchange-traded funds offering South Koreans beefed-up exposure to Samsung or SK Hynix have seen billions of dollars in inflows this year. All this amplifies gains, but also losses. Given KOSPI companies’ bright pros- pects, foreign and domestic smart mon- ey may yet stage a return. Wall Street strategists point out that South Korea’s stockmarket looks much less crowded than a month ago. It continues to look pretty cheap, too. Corporate-governance reforms, akin to those that have helped Japanese valuations in recent years, enjoy bipartisan support. Once the energy shock dissipates, the KOSPI’s wild ride could resume. But investors should prepare for it to be bumpier than ever. BUTTONWOOD K-popped? South Korea’s epic stockmarket bull run may survive the energy shock since late February, surpassing a previous peak hit in 2022. One trader says the re- gional market for short-term delivery is “at a standstill”. On top of sulphur’s use as a fertiliser, sulphuric acid is essential for leaching metals from ore in copper and nickel processing. Miners from Indonesia and Africa are scrambling for alternatives. Svein Tore Holsether, chief executive of Yara, one of the world’s largest fertiliser companies, has warned that a prolonged Hormuz closure would be “catastrophic” for food supply. With spring planting im- minent across the northern hemisphere, farmers face painful choices: pay sharply higher prices, reduce application rates or plant less maize and wheat (the most nutri- ent-hungry cereal crops). On March 13th Brooke Rollins, America’s agriculture sec- retary, said that the government was exam- ining financial “solutions” to support farm- ers, calling the fertiliser crunch a “national security issue”. For the industries hit by all these short- ages, a countdown has begun. Fertiliser that arrives weeks late cannot be used for the 2026 harvest. The knock-on effects of stopping metal processing midway could persist well into 2027. Restarting idle refin- eries, smelters and petrochemical plants— which operate at extreme temperatures and pressures—may take months. An awful lot of the world’s supply chains pass through a 54km-wide channel alongside Iran. Quite how vulnerable that makes them is only just becoming clear. ■ C002 -- 65 of 78 -- 70 The Economist March 21st 2026 Finance & economics Gross domestic pleasure ECONOMISTS CLAIM to study markets in all their forms. But one, in particular, seems to make them blush: sex work. In a new book, “Sex Work by Numbers”, Stef Adriaenssens of KU Leu- ven, a university in Belgium, estimates that less than 5% of the 18,232 academic publications on the industry produced between 2000 and 2024 took an economic or business view. By comparison, 40% concerned biology or medicine, more than 25% related to psy- chology or psychiatry and almost 20% had to do with the law. A quick search for “sex work” or “prostitution” in the database of the National Bureau of Economic Research, a collection of working papers, generates just 178 results among 35,450 articles. That is a big omission for what is a large industry. Porn alone is thought to generate almost $100bn in revenues a year worldwide, twice as much as AI. OnlyFans, a subscription site known for X- rated content, hosts 4.6m creators, many of them in adult enter- tainment. It has 380m users who together spend over $7bn a year. Estimates from UNAIDS, a UN agency, put the share of the world’s women aged 15 and over engaged in “exchange of sexual services” at 0.6%. In sub-Saharan Africa, this rises to 1.3%. Sex work is, granted, difficult to study. It covers all manner of X-rated activities. A streetwalker in Nairobi, a high-end escort in London and a cam-girl in Kyiv inhabit utterly different economic worlds. Many switch between pornography, stripping and prosti- tution as demand requires. Criminalisation drives the industry un- derground. Even where it is legal, as in Germany and the Nether- lands, stigma makes workers coy about discussing their trade. Where facts and figures are scarce, people have regularly turned to guesswork. In the late 18th century a police magistrate put the number of prostitutes in London at 50,000—or one in five women in the city aged 15-40. Half a century later the Bishop of Exeter offered an equally hazy guess of 80,000. Even today policy- makers routinely discuss the economic cost of sex work, in terms of crime and disease, confident in their conclusions but all too of- ten cavalier about evidence. Economists’ reluctance is, then, a pity. Sex work is, after all, a market shaped by supply, demand and price signals. Where they have tried, their methods can be creative and results revealing. Take the number of sex workers. In 2021 economists at Rwan- da’s health ministry and America’s Centres for Disease Control and Prevention borrowed the “capture-recapture” method from ecology to estimate a headcount. They handed out keyrings to randomly selected streetwalkers they encountered at known hot- spots across the country, then returned a week later to offer brace- lets to another random sample, this time asking if any of them had received a trinket the week before. (They came back the next week, too, for good measure.) The total number could then be worked out by comparing the different sets of results. The re- searchers concluded that between 9,000 and 23,000 women, or 0.1-0.35% of Rwanda’s female population, plied the trade. Randomised controlled trials, the gold standard, are out of bounds for obvious ethical reasons (you cannot in good con- science expose some women to unprotected sex or violence). But economists can study natural experiments. In 2018 Scott Cun- ningham of Baylor University and Manisha Shah of the University of California, Berkeley, used a Rhode Island judge’s surprise deci- sion to (in effect) decriminalise indoor sex work and found it led to a drop in both violent crime and female gonorrhoea cases. In 2020 Ms Shah and her co-authors considered the inverse situation after a district of East Java in Indonesia unexpectedly criminalised sex work. Sexually transmitted infections among sex workers rose, while women pushed out of the trade struggled to pay their chil- dren’s school expenses. As sex work is being reshaped by policy and technology, econ- omists are gaining new ways of tackling the research question. Governments are, helpfully, creating ready-made natural experi- ments by introducing new regulations. Belgium granted sex work- ers full employment protections in 2024 and Italy brought prosti- tution into the tax net last year, for example. Meanwhile the internet is changing the nature of sex work and making it a bit easier to examine. Rather than tag and recapture Belgian and Dutch sex workers at the kerb, researchers at KU Leu- ven, including Mr Adriaenssens, looked at more than 24,000 re- views posted in a 12-month period in 2019-20 on hookers.nl, a pop- ular online marketplace. By using a similar principle and maths as the researchers in Rwanda, they put the share of women aged 15- 49 in the Netherlands and northern Belgium engaged in sex work at 0.15% and 0.18%, respectively. These numbers look set to grow as platforms such as OnlyFans lower barriers to entry and attitudes towards sex work change. In Sweden, 8% of girls aged 15-19 say they have sent X-rated content or arranged to meet someone for sex in exchange for money. Only 56% of Britons aged 18-25 regard “sugaring”, when a younger per- son dates an older one for material benefits, as sex work, com- pared with 70% of over-65s. More sex, please, we’re economists In a paper published last year, Elias Carroni, Davide Dragone and Marina Della Giusta, three Italian economists, predicted that “digital sex”, such as online porn and virtual companionship, re- duces the social and psychological cost of selling sex, as abun- dance erodes stigma. Replacing physical intimacy with the digital sort, they argued, may cause a slew of economic consequences, starting with a faster decline in fertility rates. Greater supply of sexual services may also cause prices to fall, further spurring de- mand. Only a very dismal scientist wouldn’t be interested in whether they are right. ■ FREE EXCHANGE The sex economy is growing. It deserves serious analysis C002 -- 66 of 78 -- 71 The Economist March 21st 2026 Science & technology Nuclear power Chasing the sun THE STORY of Kuafu is a classic of Chi- nese mythology. The powerful giant, his arms wrapped in pythons, runs for days through hills and valleys to chase the sun that has scorched his people. His Hercule- an effort has come to symbolise explora- tion and courage in the present day; China has named various technological feats in- cluding its solar probe and an advanced humanoid robot after him. More aptly still, his pursuit has become a symbol of China’s nuclear-fusion ambitions. It was with Kuafu-like gusto, then, that 1,500 physicists, engineers and nuclear-fu- sion enthusiasts recently gathered in the city of Hefei, a research hub where China is building its Burning Plasma Experimen- tal Superconducting Tokamak (BEST), the country’s latest and greatest experimental machine to generate fusion-based power. Construction is currently on track to be completed by 2027, after which BEST will be a test bed for an even more ambitious project: the China Fusion Engineering De- mo Reactor (CFEDR) that is expected to be up and running by 2030. If that succeeds, power stations connected to the electrical grid could follow. That timeline is at least a decade ahead of other governments’ ef- forts to achieve fusion. Those present in Hefei, therefore, described BEST as a “his- toric turning-point” in China’s quest to de- velop the technology. For all of fusion’s potential to generate low-cost electricity at scale, the technolo- gy has largely remained experimental. And though America and Europe have long led the pursuit of a commercial reactor, metic- ulous planning has given China’s pros- pects a boost. Its private fusion firms have yet to rival those abroad. But the country’s national programme has become a fierce competitor. Integral to its successes is a three-pronged strategy: setting research priorities for its scientists and engineers; providing vast amounts of funding for those wonks; and building an industrial supply chain for the parts that fusion reac- tors will need. Whether or not that will be enough to guarantee victory, the race for fusion is on in earnest. For now, China has settled on tried- and-tested technologies for pursuing fu- sion. BEST is a tokamak, a doughnut- shaped reactor in which an electrically charged plasma is heated and confined by magnets until the constituent particles, made up of different types of hydrogen nu- clei, overcome the repulsive forces that normally keep them apart. When the con- ditions are right, the nuclei can be made to fuse, releasing vast amounts of energy. Much of this energy is delivered to neu- trons produced by the reaction, causing them to collide with the reactor walls at China has made itself a serious contender in the race for commercial fusion → ALSO IN THIS SECTION 72 New chips designed for AI inference 73 Fast-charging EV batteries 74 Well Informed: GLP-1s for longevity ⏩ C002 -- 67 of 78 -- 72 The Economist March 21st 2026 Science & technology ▸ ⏩ high speed, thereby generating heat. To become useful in power stations, to- kamaks will need to reach so-called burn- ing conditions, in which the plasma is dense enough for its heat to become self- sustaining. This occurs at temperatures above 150m°C and in the presence of mag- netic fields that are hundreds of thousands of times stronger than Earth’s. Chinese sci- entists are inching towards that goal. On January 1st researchers working at China’s Experimental Advanced Superconducting Tokamak (EAST), one of BEST’s predeces- sors (where a mural of Kuafu hangs) re- ported that they had successfully in- creased the density of their plasma to lev- els once thought impossible. Eking out fur- ther increases will take time. Physics challenges are one thing; engi- neering is another. Tokamaks are big ma- chines with cutting-edge components. Construction depends on a complex sup- ply chain, including power modules, vacu- um chambers and powerful superconduct- ing magnets. Chinese policy has incentiv- ised industrial firms to manufacture those parts, another area where the country is ahead of its rivals. Its engineering firms have particular expertise in the field of me- tallic carpentry, developing magnetic coils and power-conversion components used by fusion projects abroad. ITER, a long- running fusion effort based in the south of France, uses of Chinese-made parts. There is also the question of fuel. BEST is designed to fuse nuclei of two hydrogen isotopes: deuterium, which has one proton and one neutron; and tritium, which has one proton and two neutrons. Deuterium, which can be extracted from water, is inex- pensive. Tritium, by contrast, is hopelessly rare in nature and, owing to its radioactiv- ity, decays quickly. BEST will initially rely on an external supply of this fuel but its scientists hope it will eventually be able to produce its own. If the tokamak vessel is lined on the inside with a blanket of lithi- um, those atoms could, when struck by en- ergetic neutrons released during nuclear fusion, turn into tritium atoms. It is an elu- sive step many fusion projects would dear- ly love to master. To test and scale the lithium blanket as well as other fusion technologies and ma- terials, R&D is being conducted down the road from BEST, at the Comprehensive Re- search Facility for Fusion Technology (CRAFT), which is also—naturally—nick- named Kuafu. Here, engineers are devel- oping materials, magnets and components that will go into future fusion devices, as well as testing BEST’s systems. They are also developing high-precision robots that can carry heavy payloads and operate un- der high temperatures, which will help maintain the giant reactor in the future. Whereas the Europeans want to perfect technologies ahead of construction, says Yannick Marandet, research director of France’s National Centre for Scientific Re- search, the big advantage the Chinese have is their willingness to “learn by doing”. Equally important, though, has been state planners’ drive to harness fusion power. In July 2025 China created China Fusion Energy, a state-owned enterprise that sits under its national nuclear compa- ny , to tie together research efforts. On Jan- uary 15th the country’s new Atomic Energy Law went into effect, driving investment in the growing industry by setting out regula- tions. The culmination of these efforts came on March 12th, when the government included nuclear fusion in its high-level economic blueprints, including the 15th Five Year Plan. China’s largely state-led fusion efforts come as Western countries, in particular America, have seen a surge in private-sec- tor interest in the field. Across the world 77 startups have raised $15bn with the goal of eventually achieving self-sustaining fusion using technologies ranging from advanced tokamaks to laser-driven designs and reac- tors with novel layouts known as stellara- tors. These alternatives, some of which may well be cheaper or simpler, could leap- frog expensive public efforts. Some Amer- ican firms claim they will be able to supply energy to the grid by the early 2030s, a ti- meline that rivals China’s. Move fast and fuse things There are some signs China is increasingly following America’s example, driving priv- ate capital towards promising fusion start- ups. Whereas 42 American startups have raised a total of $8bn to date, eight Chi- nese firms raised about $5bn much more quickly. In April last year, NovaFusionX, a Chinese firm, raised $70m, the largest first- funding round for a private fusion compa- ny in the country. Startorus Fusion, anoth- er startup, spun out of Tsinghua Universi- ty, is betting on a spherical-shaped toka- mak, and raised double that amount in Jan- uary. Energy Singularity, another firm, hopes to reach the same goal by building extremely strong magnets, whereas ENN, a Chinese conglomerate, is using different fuels: it will attempt to fuse hydrogen nu- clei with those of boron. The pursuit need not be zero-sum. Chi- na remains open to collaboration, not only learning from ITER’s findings, but also al- lowing foreign scientists to use its ma- chines (though few Americans have shown up recently). Foreign scientists are quick to credit Chinese speed and efficiency—and progress—in improving their own projects. When BEST is up and running, it will be among the most advanced fusion experi- ments in the world, and scientists from all countries will want to collaborate, says Dr Marandet. Unlike Kuafu, then, China’s sci- entists will not chase the sun alone. ■ Chip design Points of inference NVIDIA, A MANUFACTURER of com- puter chips, is the most valuable com- pany in the world. It owes its success to the versatility of the graphics processing unit (GPU), a chip it pioneered in the late 1990s. Originally designed to make video games look better, GPUs turned out to be well suited to training large language models (LLMs). That discovery sent demand for Nvidia’s chips, and its valuation, soaring. Times are changing fast. Demand for AI computing is shifting from training mod- els to getting them to answer real-world queries, a process known as inference. McKinsey, a consultancy, estimates that by the end of the decade inference will ac- count for three-fifths of demand in AI data centres. Nvidia appears to recognise the shift. On March 16th it unveiled a new chip designed specifically for inference tasks, the Groq 3 LPX, with an architecture that departs from the traditional GPU. This time, it will have plenty of compe- tition. A crop of startups is building chips aimed at running AI models faster and more efficiently than Nvidia’s. Training and inference place different demands on hardware. Training, in which an AI model is taught to identify patterns in vast amounts of raw data, relies on enor- mous numbers of calculations being con- ducted in parallel. Nvidia’s B200 chip, for instance, one of the company’s flagship products, contains more than 16,000 pro- The GPU powered the AI boom. A new kind of chip may now be needed Back to square one C002 -- 68 of 78 -- 73 The Economist March 21st 2026 Science & technology ▸ ⏩ cessing units, also known as cores, to per- form such operations. Inference, in which a finished model calls on its training to respond to user prompts, works differently. It unfolds in two stages: prefill and decode. During pre- fill, the model processes the prompt and converts it into small units of text, typical- ly about four characters in English, known as tokens. To speed things up, tokenising different parts of the query can be done in parallel. Decoding then generates the re- sponse, token by token. To do this, the model relies on its “weights” (relationships between tokens learned during training) as well as previously generated tokens. These weights are stored in the system’s memory. The need for constant memory access is where modern GPUs fall down. AI pro- cessors like the B200 contain small but ex- tremely fast on-chip memory, known as SRAM, as well as a much larger off-chip memory known as DRAM. Accessing DRAM can be ten times slower and con- sume far more energy than reading SRAM. The problem is worsening. As AI models grow larger and become better at handling long user prompts, their memory demands are rising sharply. A study by Amir Ghola- mi of the University of California, Berke- ley, and colleagues finds that over the past two decades computing performance has roughly tripled every few years, whereas off-chip memory bandwidth has improved by a factor of only about 1.6. This “memory wall” has become the main bottleneck in increasing the speed of AI inference. You must remember this GPUs rely on software workarounds to cope. One approach splits the two stages across different processors. The prefill phase runs on GPUs optimised for high parallel computing power, while decoding runs on separate GPUs designed for fast memory access. Another technique is batching, where many queries are pro- cessed together. Once the model’s weights are loaded, they can then be used for many queries at the same time, reducing repeat- ed trips to the external memory. Nvidia’s new chip uses the power of software to give the on-chip memory a boost. The size of the SRAM is around 500 megabytes—tiny when compared with the B200’s 192 gigabytes of off-chip memory. What makes the difference is smart soft- ware that choreographs how every piece of data moves through the chip to maximise computation and memory access. Startups are experimenting with more radical designs. One approach is to simply build a bigger chip. That is the approach taken by Cerebras, an American chip de- signer. Its latest chip, the size of a dinner plate, contains an enormous 900,000 cores and 44 gigabytes of on-chip SRAM. Be- cause all data movement occurs within the wafer, Cerebras claims its system can run inference up to 15 times faster than conven- tional designs. For very large models, how- ever, storing all their parameters on SRAM is impractical. Others are tackling the problem by re- designing how data move through the cores. MatX, a startup founded by former Google chip engineers, builds on an idea used in Google’s tensor processing units (TPUs). These chips rely on what is called a systolic array, a grid of processing ele- ments through which data flow rhythmi- cally, rather like blood pumped through the body. After each calculation the result passes directly to the next unit, bypassing the need to store intermediate results in memory. Traditional systolic arrays, how- ever, are fixed in size. Make them bigger, for larger tasks, and they will often sit idle; make them smaller, and efficiency falls when the larger tasks come through. MatX proposes a “splittable” systolic array that divides the processor into several smaller grids, allocating computing resources dif- ferently depending on whether the chip is handling prefill or decode. A third approach, pursued by d-Matrix, a California-based startup, tries to elimi- nate the memory wall entirely by having the same components handle both me- mory and computation. This architecture, known as in-memory computing, promises lower energy use and faster inference. Others advocate chip designs built around specific algorithms to improve effi- ciency further. Etched, another Californian startup, is designing a chip custom-built to run transformer models, the algorithms that underpin most LLMs. This specialisa- tion allows the company to strip away hardware needed for other uses and sim- plifies the software running on the chip. Researchers in China have proposed an even more radical form of specialisation: embedding model weights directly into hardware. In one design from the Chinese Academy of Sciences, these are physically encoded in the layout of metal wires. The authors claim this technique removes the need to fetch parameters from memory, enabling extreme efficiency. Yet such specialisation carries risks. Designing a new chip typically takes 12–18 months, whereas AI algorithms evolve far faster. A chip built around today’s domi- nant model architecture could quickly be- come obsolete if the field shifts. The chips have yet to fall. Nvidia’s rivals are at different stages. Cerebras is already on its third generation of chips; d-Matrix expects to release its first widely available version this year. Others, including MatX and Etched, remain in development. Nvi- dia says the Groq 3 LPX will reach the mar- ket later this year. It is easy to see that the GPU conquered training. Inferring what comes next is harder. ■ Electric cars Topped up in minutes ALINE OF electric vehicles (EVs) plugged into rechargers as their drivers wait patiently for their batteries to be topped up has become a familiar sight at many service stations. Though some of the latest EVs can recharge in 20 minutes, many take much longer. Yet some EV driv- ers could soon be back on the road much more quickly. Companies are developing ultra-fast charging systems which can refill a battery almost as fast as a fossil-fuel car can be filled up. Rapid recharging could dispel one of the last remaining obstacles to widespread EV adoption. One such system will be unveiled in Paris on April 8th by BYD, a Chinese firm that is the world’s biggest EV maker. It con- sists of a powerful 1,500kW drive-through charger, which looks like a large overhead gantry from which recharging cables de- scend. When plugged into a Denza Z9GT, BYD’s new premium model, the car’s 122kWh “Blade Battery” can be boosted from 10% capacity to 70% in five minutes. A full charge takes nine minutes. Topping up an EV battery requires a charger to convert alternating current, as delivered from the mains, into a direct cur- rent. A charger contained in the cars them- selves can handle slow overnight charging when plugged into a household supply. For faster top-ups, beefier kit is required. This is contained in public fast-chargers, which convert power directly from the grid. There is, though, a limit to how fast a Rapid-charging EV batteries are on the way C002 -- 69 of 78 -- 74 The Economist March 21st 2026 Science & technology ▸ “RESIST SAYING, ‘this will be no panacea’. When you find some- thing that is a panacea, that will indeed be news.” This wise advice once ap- peared in The Economist’s Style Guide, and the first part is routinely enforced. Some people are, however, asking whether the second part’s time may perhaps have come, as a group of drugs now routinely prescribed for type 2 diabetes and obesity are being sought out by healthy people in the hope that they will help preserve that health for longer, and even extend life. The drugs in question are glucagon- like peptide-1 receptor agonists (GLP-1 RAs), the best known of which is sema- glutide (sold commercially as Ozempic and Wegovy). They are already being investigated, with variable success, for everything from Alzheimer’s disease (for which a pair of recent studies showed no positive effect) and Parkinson’s disease to heart failure, drug and alcohol addic- tion and even arthritis (because weight loss reduces joint strain). But what ex- cites enthusiasts is the idea that they might attack the roots of ageing itself. Studies of how people age have iden- tified a dozen or so distinct (though interlinked) “hallmarks” of the process— harmful phenomena that affect a wide range of tissues and get worse as the years roll by. Preliminary work, mostly on animals and cell cultures, but also including studies of people taking GLP-1 RAs on prescription, suggests the drugs ameliorate several of these hallmarks. Top of the list is “inflammaging”, the chronic rise in low-level inflammation which people experience as they get older. GLP-1 RAs seem to inhibit this in several ways, including stopping the formation of protein complexes that trigger inflammatory responses. They also promote the recycling of failing cellular machinery: worn-out mitochon- dria (a cell’s power packs) and misfolded proteins. This keeps cells ticking over for longer. They help, too, to modulate biochemical pathways that sense the presence of nutrients and orchestrate appropriate responses—the breakdown of which is yet another hallmark of ageing. And they promote proliferation of the type of stem cells that repopulate tissues with new, functional cells. On top of these promising individual effects, an experiment on mice suggests that GLP-1 RAs may, indeed, extend “healthspan”—the fraction of an animal’s life during which it remains in good nick. It did not, however, demonstrate any extension of lifespan. Nor is preliminary work of this sort the same as proper clinical trials. But that has not stopped many people from jumping the gun by seeking out friendly doctors to prescribe the drugs “off-label”. On the face of it, this sounds risky. Treating diabetes and obesity, and thus balancing efficacy against side-effects such as pancreatitis, is one thing. Healthy individuals taking GLP-1 RAs for a lifetime, even in small doses, is anoth- er. Many users are aware of this, how- ever, and in the absence of the sort of top-down monitoring that would happen in an organised trial have banded togeth- er in internet forums to monitor each other and pass around tips. This is, indeed, part of a wider trend of mutual support at the fringes of phar- macology, with similar user groups forming to monitor off-label use of other peptide drugs and thus, in effect, run- ning informal, uncontrolled trials. Whether those now taking GLP-1 RAs prophylactically will live to regret doing that or, conversely, will live long enough not to, remains to be seen. Well Informed Can GLP-1 drugs help you live longer? The evidence is tantalising. But that is not the same as proof lithium-ion battery, the type commonly used in EVs, can be recharged. When the battery is plugged in, charged particles called lithium ions migrate from the cath- ode to the anode, where they are squir- relled away and stored. When the battery is discharged, the ions migrate back. The difficulty is that as the charge rate increas- es, bottlenecks can build up in the flow of ions, particularly into the anode. This creates resistance and damaging heat. BYD says its Blade Battery uses cath- odes and anodes that have been engin- eered at the molecular level to increase ion flow. In part this is done using thin compo- nents, which reduce internal resistance. For these batteries to live up to their poten- tial, BYD will need to install its mighty 1,500kW chargers at service stations, where most existing fast-chargers operate at 100- 350kW. BYD aims to install its big chargers globally and expects to have 20,000 opera- tional in China by the end of the year. Nyobolt, an energy-storage company spun out of the University of Cambridge, in Britain, has taken a less daunting ap- proach to the same problem. The 35kWh battery it has installed in a lightweight sports car can, when plugged into an exist- ing 350kW fast-charger, be boosted from 10% capacity to 80% in under five minutes. Although the battery has a small capacity by today’s standards, the light weight of the car means it can still provide a range of around 250km (155 miles). The company can also produce bigger versions. Like BYD, Nyobolt overcomes the inter- nal resistance problem by redesigning the electrodes. Its anodes are built out of a proprietary form of niobium-tungsten ox- ide, which allows ions to enter and leave much faster, increasing the charge rate. Nyobolt already supplies batteries equipped with these anodes for use in data centres, which require fast-charging bat- teries to smooth out huge swings in power demand. The company also recently signed a deal with Symbotic, an American firm, to equip its warehouse robots with fast-charging batteries, allowing the bots to work for longer. Nyobolt is talking to a number of vehicle manufacturers, too. These increases in speed come with a cost. One consequence of fast charging is that the added strain on batteries can lead them to lose their capacity more quickly than with regular charging. Engineers are also getting on top of that problem. Sai Shivareddy, Nyobolt’s boss and co-foun- der, says its batteries have been tested over more than 4,000 fast-charging cycles, equivalent to a car travelling around one million kilometres, while retaining more than 80% of their capacity. BYD says its battery will also have enhanced durability. The opportunity to relax with a coffee or take a nap while your EV recharges may soon be a thing of the past. ■ C002 -- 70 of 78 -- 75 The Economist March 21st 2026 Culture Tourism today Wanderlust and lost WHEN HE BEGAN his blitz on alleged drug-runners in the Caribbean Sea, Donald Trump didn’t mean to hit water- sports in Tobago. But it seems he did. Bookings are down for the peak winter sea- son, says Brett Kenny, an operator on the island; some tour groups have stayed away. Other Caribbean countries have been hurt more by American strikes, especially in January, when the raid on Venezuela grounded flights and stranded travellers. Geopolitics has long nobbled tourism. The Grand Tour, which took British toffs to Parisian salons and Roman ruins, was rerouted by the French revolution and Na- poleonic wars. Today there are more inter- national trips than ever: 1.5bn overnight visits last year, calculates the UN, above the pre-pandemic high in 2019 (see chart 1 on next page). But in the intricate vacation economy, there is also more scope for po- litical disruption, intentional and acciden- tal. Tourism is a microcosm of the tussle between globalisation and protectionism. More people than ever want to travel—but they face proliferating obstacles. Wars cause the sharpest convulsions. Thousands of flights were cancelled after America and Israel attacked Iran. In its re- venge bombardment of nearby countries, Iran damaged Dubai’s airport—a vital transit hub, like Doha’s in Qatar—plus a hotel on Palm Jumeirah, a flagship penin- sular. The price of chartering private jets soared as fat-cats skedaddled via Saudi Arabia or Oman. The Middle East is losing at least $600m in visitor spending a day, estimates the World Travel & Tourism Council (WTTC), an industry body. “It takes time to rebuild trust” after a war, counsels Michael Ben-Baruch of Isra- el’s tourism ministry. His country’s travel industry is still recovering from the atroc- ities of October 7th 2023 and the campaign in Gaza. Last year Israel welcomed 1.3m in- ternational visitors, down by 71% from 2019. (Christian pilgrims and residents’ rel- atives are the most stalwart guests.) A new luxury hotel was scheduled to open in Jeru- salem in time for Passover in early April. Then Israel’s airspace closed again. Or think of the rippling effects of Rus- sia’s onslaught on Ukraine—including for Russians themselves. For those who re- member the Soviet Union, freedom to tra- vel was a big dividend of its fall. They still can—but, because of Western restrictions, often to different places. In 2024 Russian visitors to the European Union’s border- less Schengen area were down by 90% on 2019. As rules for visas tighten, and existing ones expire, the blingy Russian contin- gents on the Côte d’Azur will shrivel. America continues to give tourist visas to Russians, but not in Russia itself; they are meant to apply in Kazakhstan or Poland. The number issued has plunged since 2019. The ensuing rejig of travel habits re- flects a wider switch in Russia’s relations. Turkey, which admits Russians without a Ever more people want to see the world—if war and politics let them → ALSO IN THIS SECTION 77 World in a dish: sparkling water 77 Trotsky’s death, revisited 78 The enduring allure of mafiosi 79 A Parisian hotel with a past ⏩ C002 -- 71 of 78 -- 76 The Economist March 21st 2026 Culture ▸ visa, remains their favourite bolthole. But otherwise their top-ten destinations have shifted, reports the Association of Tour Operators, a Russian business group. In 2019 these included Germany, Estonia and Finland. All have vanished from the list for 2025, which features Egypt, Vietnam, the UAE and Indonesia. Among visitors to Rus- sia itself, Americans, Japanese, Koreans and most Europeans have given way to Ar- abs, Indians and Iranians. Other travellers have been affected too. Banned from Russian airspace, Western airlines must take longer routes from Europe to Asia. Each extra minute of flight that results is reckoned to raise air fares by $1.60. The Iran war has narrowed flight- path options again (and hiked fuel costs); an escalation in the fighting between Paki- stan and Afghanistan could squeeze them even further. Today it takes an hour longer to fly from London to Delhi than in 2021, and two hours longer to Tokyo. The unwelcome mat Yet for all the hurdles and hassles, “People want to travel,” says Gloria Guevara of the WTTC. Vigorous pensioners and intrepid youngsters have helped tourism rebound from the wipeout of the pandemic—which stoked wanderlust rather than extinguish- ing it. Glimpses of paradise on social me- dia entice people to far-flung locales. Around the world, the newly affluent want to see more of it; as countries grow richer, their citizens are welcome in more places. Last year’s record level of foreign trips is forecast to climb by over 50% in a decade. Politics, though, will help steer this surge—especially the stance of the world’s two most powerful nations. Consider Chi- na first. In 2025 Chinese travellers made al- most nine times more overseas trips than in 2000. Together they outspend any other nationality, says the WTTC, splurging around $50bn more than Americans on tra- vel last year. Places with benign visa rules for Chinese visitors, such as Malaysia, South Korea and Singapore, are profiting. Amid that increased mobility, however, China uses travel as a tool of domestic con- trol and external leverage. Many employ- ees of state agencies, or of publicly funded bodies such as universities, must surrender their passports. If they want to use them, their itineraries are vetted. As for everyone else: officialdom has a say in where they go—and where they don’t. Many governments issue warnings about safety concerns in other countries, which deter visits in part by making insur- ance expensive or unobtainable. China’s guidance, which carries particular clout with government workers, is sometimes motivated by politics more than risk. Amid tensions with Japan, for example, Chinese officials have repeatedly advised citizens against going there. Chinese carriers have cancelled flights to Japanese airports. Visits to Japan have duly plummeted— by 45% in December 2025 compared with a year earlier, says the Japan National Tou- rism Organisation, a state body. There was also a steep drop from 2025 over the recent Lunar New Year, popular for Chinese get- aways. Like Saudi Arabia, which has spent lavishly to boost tourism, Japan has shot up the destination league, partly because a weaker yen makes it more affordable (see chart 2). China’s attitude is a setback. Taiwan is also off-limits for most Chi- nese holiday-makers (amid strained rela- tions, Taiwan isn’t keen to have them any- way). Still, the government’s sway over Chi- nese travellers is being undermined by their evolving habits. As they become more demanding and adventurous, more are making their own holiday plans—eschew- ing groups, some organised by state-run agencies, which are much easier to corral. According to Fastdata, a data-services out- fit, in 2005 just 14% of Chinese tourists travelled independently; last year 83% of them did. The independent Chinese trav- eller will be a linchpin in tourism’s future. Rather than dictating where Americans go, their government, meanwhile, is shap- ing who comes in. Citizens of 19 countries in Africa, Asia and the Caribbean are now ineligible for tourist visas, avowedly for se- curity reasons; some others must pay hefty bonds to get them. Waiting times have ris- en. Unintended disincentives matter even more. Horror stories circulate of blameless tourists detained at America’s border. Footage of unrest in cities such as Minne- apolis is alarming. Visitors could once blithely overlook such ructions, but in the digital age, they are part of the brochure. Then there is the ambient sense that America has become a less friendly place. A poll of global travellers by Future Part- ners, a market-research firm, found the share who don’t feel welcome there has more than doubled in a year; outright re- fusal to visit America has almost tripled. The upshot is that it is the only major des- tination failing to capitalise on the travel The great escape Sources: UNWTO; Tourism Economics 1.5 1.0 0.5 0 25 20 15 10 05 2000 95 1990 International tourist arrivals, annual, bn Rank of top destination countries 26 25 19 2010 Saudi Arabia Thailand Japan US China Spain France boom. International visits declined by 6% last year, say the WTTC and Oxford Eco- nomics, a consultancy. Already overtaken by Spain, America is set to fall behind Chi- na as a global draw. (France is top.) Canadians, who in the past made up a quarter of arrivals, are particularly squeam- ish: the number crossing the southern bor- der has sunk by a fifth. “It feels like a hos- tile state,” says Steve, a lawyer from Van- couver and formerly a regular visitor. “There are lots of other places to go.” Threatening to annex your neighbour turns out to be a bad marketing strategy. (Until recently sun-seeking Canadians also favoured Cuba, but its hotels are being choked by an American fuel blockade. It doesn’t take missiles to wreck a resort.) All this means America’s “travel defi- cit”—the gap between visitor spending and what Americans blow abroad—widened to $72bn in 2025, says the US Travel Associa- tion, an industry group. This summer’s football World Cup will be a fillip. But, if enacted, a plan to make tourists submit five years’ worth of social-media activity will be toxic. A third of overseas travellers say this daft measure would put them off. Closed airspace, fuel-price spikes, visa bans, wars, warnings, reputational self- harm: in all these ways, geopolitics deter- mines where you want to go on holiday, how you get there, how much it costs, and whether you will be let in. In a more mobile and connected world—yet also a more fractious one—these glitches will wreck the plans of ever more travellers. What a shame. When the world is ablaze, fretting over holidays may seem petty. It isn’t: besides being a huge indus- try, travel is an engine of happiness and progress. It makes lives richer; it stores up fond memories. By letting people grasp other cultures’ nuances, travel is also “fatal to prejudice, bigotry and narrow-minded- ness”, Mark Twain wrote. Every country, after all, is more than its politics. And as much as their differences, it shows strang- ers what they have in common. In fraught times, statesmen should smile on that. ■ C002 -- 72 of 78 -- 77 The Economist March 21st 2026 Culture ⏩ World in a dish Which sparkling water is the best? ANGELO ROEFARO loves nothing. He wants you to love nothing, too. A small, trim man with a neat beard, he manned his stall at the recent Brooklyn SeltzerFest with the manic energy of a caffeinated ter- rier, thrusting little paper cups at passers- by. “See? You finally taste nothing!” Mr Roefaro boasts that he spent “six months researching bubbles”. The result is clean- tasting and only lightly fizzy. Some may see the launch of a new un- flavoured seltzer—Seltzie, with the slogan, “only one flavour: none”—as a sign of a bubble in the sparkling-water business. At the stalls on either side, consumers could sample tangerine-ginger, passionfruit, lime-mint, blackberry-cucumber and rasp- berry, all produced by Topo Chico, a pop- ular Mexican brand owned by Coca-Cola. A rising tide is lifting all fizzy waters. With alcohol consumption declining, spar- kling water is more popular than ever. Sales of it in America were around $6.4bn in 2025, up 70% from 2019, according to Min- tel, a research firm. Joseph Priestley, an English chemist, is credited with creating artificially sparkling water in 1767 by infusing it with carbon di- oxide. Some 15 years later Johann Schweppe, a Swiss scientist whose name in possessive form should be familiar to any enthusiast, started a company to produce it at scale. Soda fountains, which make car- bonated drinks on site, spread in the 19th century. In America sparkling water proved especially popular among Jewish immigrants, perhaps because it was the cleanest water available on Manhattan’s Lower East Side. It was known as “seltzer”, after a German town famous for its spar- kling water. (Today many use sparkling wa- ter and seltzer interchangeably.) Consumers are spoiled for choice. For European sophisticates (or wannabes), there are the delicate bubbles of Badoit or San Pellegrino. Georgians rave about the putative healing properties of Borjomi, a naturally sparkling water with a sulphu- rous scent and heavy mineral flavour that detractors compare to fizzy saliva. So buoyant is demand for sparkling wa- ter that even supermarket chains have their own lines of the flavoured sort. People try- ing to cut back on fizzy drinks can choose lightly fruity Spindrift or La Croix. Gour- mets and Texans—not always separate cat- egories—love the large, sharp bubbles and clean taste of Topo Chico, which has re- cently experienced a shortage. (As one T- shirt at the festival boasted, “Good seltzer should hurt.” You will understand if you have ever guzzled one too quickly.) So which is the best? Some people pref- er a Badoitesque whisper of bubbles, but that seems an experiential waste. Topo Chico, with its lack of mineral aftertaste and bubbles that pack a punch, pairs per- fectly with spicy food, cuts through rich- ness and settles the stomach. Consumers should cheer. And then burp. ■ BROOKLYN Diving into the frothy world of bubbly Leon Trotsky’s murder Hatchet job MOST MURDER mysteries end with a revelation: the sleuth explains who did it, where, why and how. But how do you tell a gripping story when all of that is known? Josh Ireland, a writer and editor, overcomes that problem in a new book about one of the most famous murders in history: that of Leon Trotsky, in Mexico City, with an ice pick. (Actually it was a mountaineering axe, but why split hairs ov- er splitting heads?) The murderer was Ra- món Mercader, a Spanish communist and secret agent, acting on the orders of Josef Stalin, who loathed his one-time rival. What is there new to say, 86 years later? A lot, it turns out. Mr Ireland has a novel- ist’s eye for detail and captures the charac- ters’ complexity. Trotsky was brilliant, charismatic and a gifted speaker; he was also vain and aloof. One reason Stalin, rather than he, succeeded Vladimir Lenin was that Trotsky “took no time to meet the Bolshevik faithful” after his electrifying speeches. One of his most ardent admirers admitted that his capacity for friendship was “about on the level of a barnyard fowl”. Mercader, meanwhile, was charming, handsome, eloquent and “a gifted actor who appeared to actively enjoy deceit…in short, the perfect spy”. He was an agent for the Soviet internal police, the NKVD, which committed atrocities at Stalin’s command. The book follows him as he tra- vels between America and Mexico in the run-up to the assassination (after a hilari- ously incompetent first attempt involving machineguns and liquor failed). “The Death of Trotsky” does not offer new breakthroughs or revelations about this notorious crime. But narrative master- works do not always need to unearth new history, if they can combine meticulous re- search with propulsive pacing. This was true with Erik Larson’s “The Devil in the White City” (2003), a bestseller about a se- rial killer and Chicago World’s Fair in 1893, and David Grann’s “Killers of the Flower Moon” (2017), about the Osage murders. Mr Ireland’s book opens in 1907 with Stalin’s and Trotsky’s first meeting, at a conference for the Russian Social Demo- cratic Labour Party in London: “The two men felt an immediate and almost physical revulsion for each other.” Trotsky was elo- quent and authoritative; Stalin apparently said nothing for three weeks of meetings. The Death of Trotsky. By Josh Ireland. Dutton; 384 pages; $35. John Murray; £25 C002 -- 73 of 78 -- 78 The Economist March 21st 2026 Culture ▸ They are the two poles of the narrative, though they never saw each other again after Stalin exiled Trotsky in 1929. Over the course of the book, Trotsky wanders anx- iously around the world, as Stalin seethes and plots from Moscow. Trotsky lived with Frida Kahlo and Die- go Rivera for as long as they could tolerate each other. Natalia, Trotsky’s doting wife, acted as an intermediary between her hus- band and the world. People floated in and out of their lives; Mr Ireland brilliantly foreshadows the end by emphasising Trotsky’s naive indifference to security (he hated searching visitors for weapons). Trotsky has long been one of the left’s great “what ifs”. (If only he had outma- noeuvred Stalin to succeed Lenin, the Sovi- et Union might never have endured so much violence, some believe.) Mr Ireland does not agree. Compared with Stalin, Trotsky seems almost meek, but in fact he was just as eager to kill as any other Bol- shevik. While still in Russia he approved summary executions and village burnings in response to a peasant rebellion and helped create the NKVD. “We must rid our- selves once and for all of the Quaker-Papist babble about the sanctity of life,” Trotsky once said ominously. Mr Ireland shows that Trotsky’s murder was less tragic than pathetic. By the time of his death he was isolated and powerless, living on the cinders of his reputation. Sta- lin murdered him out of personal hatred and paranoia, not because he had any actu- al reason to fear him. Nor is this ancient history. Once upon a time critics of Rus- sia’s leaders ended up axed down or shot; more recently they have fallen out of win- dows and been poisoned. Plus ça change. ■ Organised crime The gang’s all here ONLY A FOOL would associate with Tommy Shelby: he is a gangster, dope fiend and murderer. He is also eminently watchable, thanks to Cillian Murphy’s cap- tivating, dead-eyed portrayal. Shelby is the dark heart of “Peaky Blinders”, which ran for six seasons and has returned as a film, “Peaky Blinders: The Immortal Man”, streaming on Netflix from March 20th. On-screen mafiosi like Shelby make riv- eting anti-heroes: think of Al Pacino’s turn as Michael Corleone in “The Godfather” and James Gandolfini’s depiction of Tony Soprano. Such portrayals, Ryan Gingeras, an American historian, explains in an en- gaging book, have influenced how actual gangsters act, talk and see themselves. The real-life versions may be less charming and eloquent—but, like their fictional counter- parts, they reveal a great deal about the societies in which they operate. Mafias have “reflected” and “helped de- fine the making of the modern world”, Mr Gingeras contends, taking readers from classical Rome to modern Las Vegas to bolster his argument. Across times and places similarities emerge, such as clan- nishness, ruthless enforcement of rules and devotion to arcane initiation rituals. They got their name in the early 1800s but have a rich “pre-history”. Mafias dis- placed brigands and bandits: simple thieves who preyed on travellers. Some brigands, such as the delightfully named Bulla Felix of third-century Rome, con- trolled small armies, but going brawn for brawn against a functional state is usually a losing proposition. A few lucky bandits were co-opted by young states that needed the muscle. As states grew richer, as well as more or- ganised, powerful and urban, they devel- oped police forces that extended their au- thority and helped wipe out roving bandit groups. So mafias emerged in places the government’s influence did not fully reach—such as southern Italy, where the Camorra thrived in Naples and the Mafia in Sicily. Japan’s yakuza drew members from “the lower ranks of society” and gave them a job and a sense of purpose. Mafiosi grew in tandem with, and sometimes assisted, the countries where they operated. Du Yuesheng, for instance, got rich through opium, prostitution and gambling in inter-war Shanghai, then be- came a philanthropist and allied with Chiang Kai-shek’s Nationalists. Lucky Lu- ciano aided America’s intelligence efforts in the second world war. Whitey Bulger, who ran one of Boston’s most feared gangs, helped the FBI apprehend his rivals. Some gangs started out as simple kid- nappers and extortionists, but Mr Ginge- ras convincingly argues that prohibition— of opium in China, gambling in Japan, al- cohol in early 20th-century America— created modern mafias. It also created the first globally famous mafioso: a New York- er named Alphonse Capone who spied op- portunity in Chicago in the 1920s and founded the feared Chicago Outfit. In America the mafia’s power waned in the late 20th century. The Racketeer Influ- enced and Corrupt Organisations Act of 1970 let prosecutors charge crime-family heads for underlings’ misdeeds that were part of a “continuing criminal enterprise”. Bosses, used to seeing versions of them- selves on screen, came to love the lime- light, which the old guard resented. “It took a hundred years to put this together,” one old-timer complained to John Gotti, the flashy head of the Gambino crime clan. “You’re ruining it in six months.” But mafiosos’ hold over popular culture remains entrenched. In Turkey people started calling gangsters baba (godfather) after seeing Francis Ford Coppola’s films. Mr Gingeras notes that recruits to one Mexican cartel are still required to watch the trilogy “as a necessary tutorial in the meaning of loyalty and family values”. Sites of violent showdowns have become tourist destinations. Visitors flock to the Mob Mu- seum in Las Vegas, which features a bullet- riddled wall against which seven of Ca- pone’s rivals were machinegunned to death in 1929. The venue even cheekily of- fers discounted admission to law enforce- ment—an offer, surely, they can’t refuse. ■ Mafia: A Global History. By Ryan Gingeras. Simon & Schuster; 416 pages; $35 and £25 They’re family guys C002 -- 74 of 78 -- 79 The Economist March 21st 2026 Culture History Rooms with a view CHANCES ARE, most people who pay several thousand euros a night to stay in a five-star hotel in Paris do not—or do not want to—think about it. But during the second world war the city’s grandest hotels hosted a very different sort of guest: Nazis. The blue-carpeted Ritz operated a Ger- man wing, welcoming Hermann Göring, Adolf Hitler’s second-in-command. Near- by, closer to Place de la Concorde, the Cril- lon and Meurice were commandeered to house military governors and officers. Near the Arc de Triomphe, the Majestic (now the Peninsula) hosted the then- triumphant German military command. Meanwhile, on the left bank of the Seine, the Abwehr (German military intel- ligence) used the Lutetia as its base. The hotel’s elegant Art Deco building has grapes etched into its stone—a fitting mo- tif, given the amount of wine the Nazi offi- cers consumed as long-stay guests. But the Lutetia has a different place in history from the other hotels, because of what happened after the war. It served as the largest reunification centre in France, with an estimated 20,000 concentration-camp survivors coming through its doors in 1945, about a third of those who returned. “Out of all the grand hotels in Paris, the Lutetia was the only one to be offered the ‘redemption’ of receiving returning depor- tees after the compromises of the occupa- tion,” writes Jane Rogoyska, a British au- thor. In “Hotel Exile” Ms Rogoyska tells the story of Paris in the 1930s and ’40s, with the Lutetia as the through line. Named after the ancient Roman city that would become Paris, the Lutetia opened its doors in 1910, with its interiors resembling those of a sleek ocean liner. Its backers, the board of Bon Marché, Paris’s first department store, were expecting smooth sailing: they planned to attract a splashy clientele who would stay the night after splurging. Instead two world wars erupted within three decades. During the first, the hotel housed French officers and converted banqueting rooms into a Red Cross hospital. The author chronicles the foggy period before the second world war, with all its delusions and changes of heart. The Jews arriving in France in the early 1930s be- lieved they were leaving Germany only temporarily. Before Hitler, the Weimar Re- public had had 16 chancellors in about 15 years, averaging less than 11 months in of- fice. Many émigrés thought Hitler would not last. At first the French welcomed the newcomers, but soon the number of immi- grants ballooned—and French charity shrivelled. The new arrivals were trapped: they could not return to Germany, get a work permit in France or secure an identity document to travel elsewhere. In the build-up to war the Lutetia host- ed German émigrés, such as Heinrich Mann, a novelist, and Willi Münzenberg, a communist agitator. They gathered at the hotel to organise a meeting—known as the “Lutetia Committee”—to voice their dis- sent about Germany’s dictatorship. James Joyce took part, too, and the Irish author even lived at the hotel for a while. When the Germans arrived at the Lute- tia in 1940 after conquering Paris, there was nothing for the hotel staff to do but ac- commodate them—and, in the case of the Abwehr’s chief, Wilhelm Canaris, his dachshunds. (When travelling he booked twin beds so they could sleep beside him.) But there were a few acts of clever resis- tance: one employee sequestered the ho- tel’s finest wine in a section of the cellar and built a wall, so the Germans did not know it was there. The most riveting—and heartbreak- ing—era at the Lutetia took place after the war’s conclusion. Those who had beaten the odds and survived the camps were en- titled to a 48-hour stay, during which they were fed and interviewed, and received medical treatment and identity docu- ments. The Lutetia was where people hop- ing to reunite with their families came to wait in cautiously optimistic anguish. It was also where the horror dawned on them of what had been happening out of sight. The average weight of the returning depor- tees was 48kg (106lb). Ms Rogoyska mined news clips and ar- chives for chilling and memorable stories from survivors. One member of the French resistance, Charles Palant, could not bear to tell his sister-in-law that he had seen her brother die in a camp, so he went to the Lu- tetia to wait for him, “so that Lily could still have something to hope for, at least for a while…until time took it upon itself to put the truth in place”. At the heart of the book (and the title) are the different forms of exile experi- enced by people passing through the hotel. There was the exile of the first wave of Ger- man Jews fleeing their government; the “strange exile” of German officers in their “prolonged posting in a smart hotel”. And there was the exile of survivors who re- turned from camps. To Parisians these de- portees were a reminder (a “living re- proach”, Ms Rogoyska argues) of French collaboration with the Nazis, which they wanted to forget. And so the warm wel- come offered to deportees at the Lutetia turned colder, as time marched on. Do you have reservations? Hotels can make for evocative settings, and this is not the first book to narrate his- tory through a revolving door. “The Finest Hotel in Kabul” (2025) and “The Secret Life of the Savoy” (2020) are just two recent examples. Unfortunately, though there is a lot that redeems it, “Hotel Exile” is not a five-star. As in a hotel lobby, too many peo- ple come and go in a hurry. Ms Rogoyska’s penchant for micro-chapters with self-evi- dent titles over deeper analysis prevents the book from being excellent. Still, it may make you see Paris differ- ently. In a city where so many remarkable events have unfolded, the selection of what to memorialise in stone is revealing. Streets are peppered with signs marking the spot where French resistance fighters were gunned down. But other mentions of the occupation are scarcer. Walk down Boulevard Raspail to the Lutetia’s en- trance, and not far from the nameplate ad- vertising that it is a Mandarin Oriental, there is a plaque commemorating its role as a welcome centre for camp survivors. Nowhere is it acknowledged who was stay- ing in the hotel beforehand. ■ Hotel Exile: Paris in the Shadow of War. By Jane Rogoyska. W.W. Norton; 352 pages; $31.99. Allen Lane; £25 PARIS A luxury hotel, the Lutetia, is a portal to Paris’s past If these walls could talk C002 -- 75 of 78 -- 81 The Economist March 21st 2026 Economic & financial indicators Gross domestic product Consumer prices Unemployment Consumer prices Unemployment Current-account Budget Current-account Budget Interest rates Currency units % change on year ago % change on year ago rate balance balance rate balance balance rate balance balance 10-yr gov't bonds change on per $ % change latest quarter* 2026† latest 2026† % latest quarter* 2026† latest 2026† % latest quarter* 2026† latest 2026† % % of GDP, 2026† % of GDP, 2026† latest, % year ago, bp Mar 19th on year ago % of GDP, 2026† % of GDP, 2026† latest, % year ago, bp Mar 19th on year ago % of GDP, 2026† % of GDP, 2026† latest, % year ago, bp Mar 19th on year ago % of GDP, 2026† % of GDP, 2026† latest, % year ago, bp Mar 19th on year ago United States €.ƒ United States €.ƒ Q4 ƒ.† €.‡ €.ˆ ƒ.† €.‡ €.ˆ Feb 3.2 ˆ.ˆ Feb -‹.‡ -Œ.‡ 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-‹.ƒ ’†,ƒ€‡ -‹.ƒ Malaysia Œ.‹ alaysia Œ.‹ Q4 ‹.• ‡.’ ’.ˆ ‹.• ‡.’ ’.ˆ Feb 2.0 €.‘ Jan§ €.‹ -‹.‡ ‹.‡ -€’.ƒ €.‹ -‹.‡ ‹.‡ -€’.ƒ €.‹ -‹.‡ ‹.‡ -€’.ƒ €.‹ -‹.‡ ‹.‡ -€’.ƒ ‹.‘€ ’‹.‡ Pakistan ‹.† akistan ‹.† 2025** na ‹.‡ †.ƒ na ‹.‡ †.ƒ Feb 5.0 Œ.‘ 2025 -ƒ.• -ˆ.ˆ ’€.ˆ ††† ’€.ˆ ††† ’ƒ.ƒ €†‘ ƒ.‹ ’ƒ.ƒ €†‘ ƒ.‹ Philippines ‹.ƒ Philippines ‹.ƒ Q4 €.ˆ ˆ.‹ €.ˆ €.ˆ ˆ.‹ €.ˆ Feb 3.2 ‡.• Q1§ -‹.† -‡.‘ Œ.† ‡€.ƒ -‹.† -‡.‘ Œ.† ‡€.ƒ -‹.† -‡.‘ Œ.† ‡€.ƒ -‹.† -‡.‘ Œ.† ‡€.ƒ ‡‘.• -ˆ.€ ‡‘.• -ˆ.€ Singapore Œ.‘ e Œ.‘ Q4 •.† ‹.€ ’.ˆ •.† ‹.€ ’.ˆ Jan 1.7 €.ƒ Q4 ’‡.ƒ ’.’ €.’ -‡•.ƒ ’‡.ƒ ’.’ €.’ -‡•.ƒ ’‡.ƒ ’.’ €.’ -‡•.ƒ ’‡.ƒ ’.’ €.’ -‡•.ƒ ’.€• ‹.‘ ’.€• ‹.‘ South Korea ’.Œ orea ’.Œ Q4 -ƒ.Œ €.‡ €.ƒ -ƒ.Œ €.‡ €.ƒ Feb 1.8 ‹.ˆ Feb§ ˆ.‘ -€.ˆ ‹.Œ •Œ.ƒ ˆ.‘ -€.ˆ ‹.Œ •Œ.ƒ ˆ.‘ -€.ˆ ‹.Œ •Œ.ƒ ˆ.‘ -€.ˆ ‹.Œ •Œ.ƒ ’,‡ƒ‘ -‹.‘ ’,‡ƒ‘ -‹.‘ Taiwan ’€.† aiwan ’€.† Taiwan ’€.† T Q4 €‹.Œ Œ.‘ ’.• €‹.Œ Œ.‘ ’.• Feb 1.5 ‹.ˆ Jan €‹.‹ ƒ.† ’.‡ -’‘.ƒ €‹.‹ ƒ.† ’.‡ -’‘.ƒ €‹.‹ ƒ.† ’.‡ -’‘.ƒ €‹.‹ ƒ.† ’.‡ -’‘.ƒ ‹€.ƒ ‹.ƒ ‹€.ƒ ‹.ƒ Thailand €.‡ Thailand €.‡ Q4 †.• €.ƒ -ƒ.‘ †.• €.ƒ -ƒ.‘ Feb 0.9 ƒ.‘ Jan§ €.Œ -ˆ.† €.ƒ -’ˆ.ƒ €.Œ -ˆ.† €.ƒ -’ˆ.ƒ €.Œ -ˆ.† €.ƒ -’ˆ.ƒ €.Œ -ˆ.† €.ƒ -’ˆ.ƒ ‹€.• €.ˆ ‹€.• €.ˆ Argentina ‹.‹ rgentina ‹.‹ Q3 ’.’ ‹.ƒ ‹‹.’ ’.’ ‹.ƒ ‹‹.’ Feb 28.6 †.‡ Q4§ -€.ƒ ƒ.ˆ na na -€.ƒ ƒ.ˆ na na -€.ƒ ƒ.ˆ na na ’,‹‘ˆ -€‹.ˆ Brazil ’.• azil ’.• Q4 ƒ.Œ ’.• ‹.• ƒ.Œ ’.• ‹.• Feb 4.0 ‡.ˆ Jan§‡‡ -€.• -†.’ ’‹.‘ -Œ†.ƒ -€.• -†.’ ’‹.‘ -Œ†.ƒ -€.• -†.’ ’‹.‘ -Œ†.ƒ -€.• -†.’ ’‹.‘ -Œ†.ƒ ‡.€† †.Œ ‡.€† †.Œ Chile ’.Œ Chile ’.Œ Q4 €.‹ €.€ €.ˆ €.‹ €.€ €.ˆ Feb 3.1 •.‹ Jan§‡‡ -€.’ -’.† ‡.‡ -€†.ƒ ‘’Œ ƒ.’ -€.’ -’.† ‡.‡ -€†.ƒ ‘’Œ ƒ.’ -€.’ -’.† ‡.‡ -€†.ƒ ‘’Œ ƒ.’ -€.’ -’.† ‡.‡ -€†.ƒ ‘’Œ ƒ.’ -€.’ -’.† ‡.‡ -€†.ƒ ‘’Œ ƒ.’ Colombia €.€ Colombia €.€ Q4 ƒ.‡ €.† ‡.‹ ƒ.‡ €.† ‡.‹ Feb 5.7 ’ƒ.‘ Jan§ -€.† -Œ.‡ ’‹.ƒ ’ˆ‡ -€.† -Œ.‡ ’‹.ƒ ’ˆ‡ -€.† -Œ.‡ ’‹.ƒ ’ˆ‡ -€.† -Œ.‡ ’‹.ƒ ’ˆ‡ ‹,†ƒˆ ’’.ˆ Mexico ’.• exico ’.• Q4 ‹.‡ ’.‡ ˆ.ƒ ‹.‡ ’.‡ ˆ.ƒ Feb 3.8 €.Œ Jan -ƒ.‡ -‹.• ‘.ˆ -€.ƒ ’†.‘ ’’.‡ ‘.ˆ -€.ƒ ’†.‘ ’’.‡ ‘.ˆ -€.ƒ ’†.‘ ’’.‡ Peru ‹.€ eru ‹.€ Q4 -ƒ.Œ €.† €.€ -ƒ.Œ €.† €.€ Feb 1.6 ‡.Œ Feb§ ’.ˆ -€.‡ Œ.€ -€’.ƒ ’.ˆ -€.‡ Œ.€ -€’.ƒ ’.ˆ -€.‡ Œ.€ -€’.ƒ ’.ˆ -€.‡ Œ.€ -€’.ƒ ‹.ˆ’ Œ.† ‹.ˆ’ Œ.† Egypt ‡.‹ gypt ‡.‹ Q3 ‹‘.ˆ ‡.‹ ’‹.ˆ ‹‘.ˆ ‡.‹ ’‹.ˆ Feb 10.2 Œ.€ Q4§ -€.ƒ -Œ.€ €ˆ.‹ ˆ.ƒ -€.ƒ -Œ.€ €ˆ.‹ ˆ.ƒ -€.ƒ -Œ.€ €ˆ.‹ ˆ.ƒ -€.ƒ -Œ.€ €ˆ.‹ ˆ.ƒ ‡€.€ -‹.‹ ‡€.€ -‹.‹ Israel ‹.‡ srael ‹.‡ Q4 ˆ.€ ‹.ˆ €.ƒ ˆ.€ ‹.ˆ €.ƒ Feb 2.1 ‹.’ Jan €.‹ -ˆ.‘ ˆ.ƒ -‹‡.ƒ ‹.’€ ’†.Œ ˆ.ƒ -‹‡.ƒ ‹.’€ ’†.Œ ˆ.ƒ -‹‡.ƒ ‹.’€ ’†.Œ Saudi Arabia ˆ.‡ abia ˆ.‡ 2025 na ˆ.‡ ’.† na ˆ.‡ ’.† Feb 1.9 ‹.ˆ Q3 -‹.ˆ -ˆ.€ na na -‹.ˆ -ˆ.€ na na -‹.ˆ -ˆ.€ na na ‹.†‡ nil South Africa ƒ.• frica ƒ.• Q4 ’.‡ ’.† €.‘ ’.‡ ’.† €.‘ Feb 3.8 ‹’.ˆ Q4§ -ƒ.‡ -ˆ.€ ‘.ƒ -’Œ‡ -ƒ.‡ -ˆ.€ ‘.ƒ -’Œ‡ -ƒ.‡ -ˆ.€ ‘.ƒ -’Œ‡ -ƒ.‡ -ˆ.€ ‘.ƒ -’Œ‡ ’†.ƒ Œ.• ’†.ƒ Œ.• Source: Haver Analytics *% change on previous quarter, annual rate †The Economist Intelligence Unit estimate/forecast §Not seasonally adjusted ‡New series **Year ending June ††Latest ‹ months ‡‡‹-month moving average §§‡-year yield †††Dollar-denominated bonds Note: Euro-area consumer prices are harmonised Markets % change on: % change on: Index one Dec 31st Index one Dec 31st In local currency Mar 18th week 2025 Mar 18th week 2025 United States S&P 500 ,. -. -€. 500 ,. -. -€. 500 ,. -. -€. S&P 500 ,. -. -€. S&P United States NAS Comp ,‡ˆ. -.ˆ -. NAS Comp ,‡ˆ. -.ˆ -. NAS Comp ,‡ˆ. -.ˆ -. China Shanghai Comp ,Š€.Š -‡. . ,Š€.Š -‡. . ,Š€.Š -‡. . China Shenzhen Comp ,ŒŠ.Ž -.€ ˆ.Ž Shenzhen Comp ,ŒŠ.Ž -.€ ˆ.Ž Shenzhen Comp ,ŒŠ.Ž -.€ ˆ.Ž Japan Nikkei 225 ˆˆ,€Ž. Š. Ž. ˆˆ,€Ž. Š. Ž. ˆˆ,€Ž. Š. Ž. Japan Topix €, ‡ . Š.ˆ Ž.Š Britain FTSE 100 ‡Š,€Šˆ.€ -Š.ˆ €.Œ ‡Š,€Šˆ.€ -Š.ˆ €.Œ ‡Š,€Šˆ.€ -Š.ˆ €.Œ Canada S&P TSX €,€‡. -. ‡.Ž €,€‡. -. ‡.Ž €,€‡. -. ‡.Ž Euro area EURO STOXX 50 ˆ, €.Œ -‡.Š -Š.Ž EURO STOXX 50 ˆ, €.Œ -‡.Š -Š.Ž EURO STOXX 50 ˆ, €.Œ -‡.Š -Š.Ž France CAC 40 ,ŽŽ.Ž -Š.Ž -. ,ŽŽ.Ž -Š.Ž -. ,ŽŽ.Ž -Š.Ž -. Germany DAX* €,ˆŠ.€ -Š. -.Š DAX* €,ˆŠ.€ -Š. -.Š DAX* €,ˆŠ.€ -Š. -.Š Italy FTSE/MIB , ‡.€ -Š.‡ -Š.ˆ FTSE/MIB , ‡.€ -Š.‡ -Š.ˆ FTSE/MIB , ‡.€ -Š.‡ -Š.ˆ Netherlands AEX ‡,ŠŠŠ.Š -Š.€ ˆ.‡ AEX ‡,ŠŠŠ.Š -Š.€ ˆ.‡ AEX ‡,ŠŠŠ.Š -Š.€ ˆ.‡ Spain IBEX 35 ‡ ,ŽŽ.‡ -Š.€ -Š.‡ ‡ ,ŽŽ.‡ -Š.€ -Š.‡ ‡ ,ŽŽ.‡ -Š.€ -Š.‡ Poland WIG ‡, Š‡. Š. . Š. . Š. . Russia RTS, $ terms ‡,ŠŒŒ.€ -.€ -‡.Œ ‡,ŠŒŒ.€ -.€ -‡.Œ ‡,ŠŒŒ.€ -.€ -‡.Œ Switzerland SMI ‡, ˆ.ˆ -‡.ˆ -€.Œ SMI ‡, ˆ.ˆ -‡.ˆ -€.Œ SMI ‡, ˆ.ˆ -‡.ˆ -€.Œ Turkey BIST ‡€,‡‡ˆ.‡ -Š. ‡.ˆ Australia All Ord. Œ,Œ . -‡. -‡.Ž Œ,Œ . -‡. -‡.Ž Œ,Œ . -‡. -‡.Ž Hong Kong Hang Seng ,Šˆ. Š.ˆ ‡.ˆ Hang Seng ,Šˆ. Š.ˆ ‡.ˆ Hang Seng ,Šˆ. Š.ˆ ‡.ˆ India BSE , Š.‡ -Š. -‡Š.Š Indonesia IDX ,‡Š.Œ -€.Œ -‡ .Œ Malaysia KLSE ‡, Ž.Œ ‡. €.Š KLSE ‡, Ž.Œ ‡. €.Š KLSE ‡, Ž.Œ ‡. €.Š Pakistan KSE ‡ˆ,Ž.€ -‡.Š -‡‡. KSE ‡ˆ,Ž.€ -‡.Š -‡‡. KSE ‡ˆ,Ž.€ -‡.Š -‡‡. Singapore STI ˆ,ŠŠ. .Œ . .Œ . .Œ . South Korea KOSPI ˆ,Žˆ.Š ˆ. Š. KOSPI ˆ,Žˆ.Š ˆ. Š. KOSPI ˆ,Žˆ.Š ˆ. Š. Taiwan TWI €,€Œ. Š. ‡Œ. €,€Œ. Š. ‡Œ. €,€Œ. Š. ‡Œ. Thailand SET ‡,Š.Ž . ‡. Argentina MERV ,Ž€,ŒŽ‡.Š -.Œ -‡‡. MERV ,Ž€,ŒŽ‡.Š -.Œ -‡‡. MERV ,Ž€,ŒŽ‡.Š -.Œ -‡‡. Brazil BVSP* ‡ Ž,€Ž.Ž -. ‡‡.ˆ BVSP* ‡ Ž,€Ž.Ž -. ‡‡.ˆ BVSP* ‡ Ž,€Ž.Ž -. ‡‡.ˆ Mexico IPC ˆ, Ž.€ -. .€ Egypt EGX 30  ,‡.Š Š.Ž ‡€.Œ  ,‡.Š Š.Ž ‡€.Œ  ,‡.Š Š.Ž ‡€.Œ Israel TA-125 ,Ž. ‡. ‡ˆ. Saudi Arabia Tadawul ‡Š,Ž.€ nil .€ Tadawul ‡Š,Ž.€ nil .€ South Africa JSE AS ‡‡€, ŠŽ.Œ -€.‡ -‡.Œ JSE AS ‡‡€, ŠŽ.Œ -€.‡ -‡.Œ JSE AS ‡‡€, ŠŽ.Œ -€.‡ -‡.Œ World, dev'd MSCI ,€‡.ˆ -‡.Ž -.Š MSCI ,€‡.ˆ -‡.Ž -.Š MSCI ,€‡.ˆ -‡.Ž -.Š Emerging markets MSCI ‡,ˆ‡ .ˆ Š.‡ Œ.‡ MSCI ‡,ˆ‡ .ˆ Š.‡ Œ.‡ MSCI ‡,ˆ‡ .ˆ Š.‡ Œ.‡ US corporate bonds, spread over Treasuries Dec 31st Basis points latest 2025 Investment grade ‡Šˆ Ž€ High-yield €ŒŠ €ˆ Sources: LSEG Workspace; Moscow Exchange; Standard & Poor's Global Fixed Income Research *Total return index Commodities The Economist commodity-price index The Economist commodity-price index The Economist % change on =  Mar 10th Mar 17th* month year Dollar Index All items . . . . . . . . . . . . Food  . . . -. Industrials All . . . . Non-food agriculturals . . . . Non-food agriculturals . . . . Non-food agriculturals . . . . Metals . . . . . . . . Sterling Index All items . . . . . . . . . . . . Euro Index All items . . . . . . . . . . . . Gold $ per oz ,. ,. . . ,. ,. . . ,. ,. . . Brent $ per barrel  . . . .  . . . .  . . . . Sources: CME Group; LME; LSEG Workspace; NOREXECO; NZ Wool Services; S&P Global Commodity Insights; Thompson Lloyd & Ewart; USDA *Provisional For historical indicators data, visit economist.com/economic-and-financial-indicators C002 -- 76 of 78 -- 82 The Economist March 21st 2026 Jürgen Habermas HE COULDN’T SPEAK. After his second operation for a cleft palate, at the age of five, all Jürgen Habermas could make were muffled sounds that almost nobody understood. Of course, it got better with time. But his odd look and odder speech got him bullied and ostracised at school. For the rest of his life, when really excited, he found himself stuttering. He tried to avoid public ap- pearances, especially unsparing television, if he could. That was difficult, because as Germany’s, and probably Europe’s, most prominent intellectual he was in high demand for decades. It was also difficult because, in his thinking, communica- tion was the key to everything. His vision of an ideal society was one where, rather than rushing to fight each other, citizens would meet in a “public sphere” to address priorities and thrash out their differences. Such a sphere would not be controlled by the state or any other institution. People would be autonomous, free to speak their own minds. Only reason would rule them as they analysed the arguments of others, asking “Why do you say that?” or “Why would you do that?” And the only means of persuasion would be “the pressureless pressure” of the better argument. He tried to apply that approach to his own academic life, as he moved around the universities of Germany. His philosophy would not fit in any box. He liked Kant for his views on reason as the key to liberty (though he himself saw reason as something more insid- ious, a mole creeping through underground passageways). Hegel pleased him for his sense of forward motion in history, and Witt- genstein for seeing language as a social tool. He admired the citi- zen involvement, up to a point, of the ancient Greeks. The political left was his natural home, though he was no card- carrying member of the Social Democratic Party. When neces- sary, he rebuked it. His teaching career began and ended at the In- stitute of Social Research at Frankfurt University, a school of crit- ical social theory run post-war by Jewish neo-Marxists; he left for a couple of decades because he found them too elitist, too fatalistic (understandably) and not democratic enough, for him. The health of democracy was his core concern. His social mod- els then and afterwards were the coffee houses of 18th-century Europe. There citizens, informed by the journals and newspapers of the Enlightenment, freely debated the issues that mattered. Out of that, in the next century, grew democratic states. It was a brief flowering, because soon enough this “ideal speech situation” was refeudalised, as he put it, by political parties and commercial media, while citizens were passive consumers. In the 20th century, with the coming of the welfare state, their interests fragmented all the more to defend their own state-given benefits. And time after time, oblivious to the needs of the world as a whole, fist-pumping nationalism kept rearing its head. He was no pacifist. But surely in the 21st century war should have been superseded? In his world, authoritarianism and nationalism were the two great blocks to human progress. He had close experience of both. His boyhood and teenage years were spent under Nazism, with his father, an economist, joining the Wehrmacht and he himself in the Hitler Youth. Both of them were passive rather than enthusi- astic, but they did their bit. During the inevitable war, he helped as a first-aider and anti-aircraft gunner on the Western Front; near its end, he narrowly escaped being called up. The worst, though, was yet to come, with the Nuremberg trials and footage from the con- centration camps. Suddenly, every element of Germany’s history was cast in a different light. He realised that he, and all Germans, had lived in a politically criminal system. The need never to repeat the Holocaust dominated his think- ing. Though he was caught up in the student riots of 1968 he was ever a ’45er, not a ’68er. He first sprang to public notice with a spir- ited attack on Martin Heidegger in 1953 for writing of Nazism’s “inner truth and greatness”. (Reasoned argument could be angry, when anger was justified; as it also was, on a lighter note, when he accused Jacques Derrida of “French irrationalism”. They made it up afterwards.) He had no patience with academics who tried to excuse Germany, arguing that other countries, too, had persecut- ed Jews; no, Auschwitz was exceptional. And it fell to Germany, even if no-one else remembered, to keep alive for ever the memory of the Jews it had killed. When he scolded German politicians, it was often for shows of arrogance that suggested Germany saw it- self as a disciplinarian in Europe, rather than a country which, for half a century, had had to mend its own reputation. His great hope, and chief project, for enduring peace was the European Union. People often called him the last European, be- cause he believed in it so strongly. He helped form it and pushed for improvements: a common economic and fiscal policy, a Euro- pean constitution. Here was an entity beyond individual states, where an “acid bath” of relentless public discourse could build a better future. Sadly, it did not turn out that way. Critics attacked him for na- ivety (as well as such out-of-fashion oddities as believing in uni- versal truths). Rationality, he had to agree, was in short supply in the 2020s; most discussions quickly descended to fisticuffs or ex- changes of fire. The internet, on the face of it a forum much like a coffee house, was instead a great sea of digital noise that polarised the populace and stupidly distracted it. That would not save de- mocracy, either. Instead, he placed his faith in the ability of hu- mans to overcome, somehow, the crises of the times. Meanwhile he did not cease to worry on democracy’s behalf. For seven decades he had done so. In dozens of weighty books and in scores of newspaper articles he pleaded for civility, ratio- nality and joint purpose in human affairs. To join in the essential commonality of spoken language was still an effort for him. But there were other ways to speak. ■ OBITUARY Europe’s foremost public intellectual died on March 14th, aged 96 C002 -- 77 of 78 -- 83 PROPERTY APPOINTMENTS C002 -- 78 of 78 --