Weekly Significant Activity Report - July 19, 2025
The Kremlin is skeptical of new US threats but faces worsening economic headwinds, China and the US duel over chips and AI, Iran seeks reassurance from allies, Russia and North Korea complete talks
This week's analysis highlights some of the most significant news concerning America's adversaries between July 12, 2025 - July 19, 2025.
Summary:
Russian leaders voice skepticism about the Trump administration’s change in policy and NATO’s willingness to follow through on its new obligations.
New indicators suggest a deterioration of the Russian economy, and a growing demand for government bailouts of key industries.
China and the US try to outmaneuver one another on semiconductors and AI.
Iran convened with allies to gain leverage for upcoming nuclear talks.
Russia and North Korea conclude their “Second Strategic Dialogue.”
1. THE KREMLIN APPEARS SKEPTICAL OF NEW WHITE HOUSE THREATS AND NATO PROMISES
Putin Reportedly Unconcerned About New Threats from US
Reuters reported on July 15, that Russian President Vladimir Putin is unmoved by the Trump administration’s shift in policy toward rearming Ukraine and its 50-day deadline for ending the war. Sources within the Kremlin say Putin believes Russia can withstand new economic pressure and will see battlefield gains in the summer that strengthen its negotiating position.
Lavrov Suggests US Threats are Unserious
Commenting on the sidelines of the Shanghai Cooperation Organization Foreign Ministers forum on July 15, Russian Foreign Minister Sergei Lavrov suggested Moscow did not believe the US intended to follow through on new threats against Russia. Lavrov further commented that he believed the threats and shifting timelines appear to be a response to pressure from Europe.
Sergei Lavrov: "It used to be 24 hours, it used to be 100 days - we've been through all of this, and we really want to understand what motivates the President of the United States…
“It is clear that he is under enormous - I would say indecent - pressure from the European Union and the current NATO leadership, which unceremoniously support Zelensky's demands to continue pumping him with modern weapons, including offensive ones, at the expense of ever greater damage to taxpayers in Western countries."
Shoigu Believes That NATO Spending Targets Are Illusory
In a July 16 interview with Kommersant, Russian National Security Council Secretary Sergei Shoigu suggested that Russia does not believe Europe and Canada are serious about increasing their defense budgets.
Sergei Shoigu: “Against the backdrop of American statements about their readiness to leave NATO and withdraw some of their troops from Europe if the allies do not take on greater financial responsibility for their own security, the European vassals have agreed to all the demands of the current US president. However, the sincerity of their intentions is highly questionable.
“Moreover, the facts speak for themselves. For example, even NATO founders Canada, Italy, Portugal and Luxembourg have not yet reached the 2% target approved in 2014. However, they have at least promised to increase their defense budgets.
“In Madrid, for example, they immediately emphasized that they would not be able to implement the stated requirements, promising to increase spending only to 2.1% of their GDP. And Belgium even declared the “unrealistic” fulfillment of the NATO standard. In Brussels, they expect that they will be able to reach the level of 2.5% of GDP only by 2034. It is no coincidence that the first results of the new defense budget will be summed up by 2029, when Donald Trump’s presidential term ends. It cannot be ruled out that the Europeans, who have made deception an integral element of their foreign policy strategy, are planning to deceive the owner of the White House by reneging on the commitments they have made.”
Kommersant: “What exactly do you mean?”
Sergei Shoigu: “Having agreed to increase defense spending, European countries have left loopholes for themselves. After all, out of 5% for basic, military needs, they allocated 3.5%, and up to 1.5% for so-called related expenses related to defense and security. In this regard, European countries may resort to tricks. They will try to pass off expenses related to the development of civilian infrastructure as the aforementioned “related expenses.” For example, expenses for the construction of roads, ports, bridges, transport hubs, local and regional airports, the development of telecommunications networks, the purchase of ammunition and special equipment for the needs of emergency and operational services.”
Takeaways:
Overconfidence by Putin and his inner circle, indicated by the statements above, has been a major contributing factor behind Russia’s worsening strategic position. Putin was confident three and a half years and one million casualties ago that he would effortlessly win the war in Ukraine in less than a week. Ever since, Putin has repeatedly been reported to believe that a Russian breakthrough was close at hand. This has led the Russian army to pour more and more resources into a shrinking number of key axes of advance, sustaining incredible numbers of casualties in the process. At present, Russia still does not even have full control of the four territories it annexed in September 2022.
The all-consuming nature of Putin’s belief in an inevitable battlefield breakthrough has led Russia to lose ground in the Middle East and South Caucasus and become dependent on foreign military assistance. Meanwhile, the war has increasingly encroached on Russian territory with growing numbers of Ukrainian drone strikes and the Ukrainian military retaining a toehold in Kursk and Belgorod.
Russia is unlikely to make a major breakthrough in the next 50-days despite Putin’s confidence. There are several key reasons Russia still struggles to press its advantages in size and material, including Ukraine’s will to fight and the support of its allies. Another reason a battlefield breakthrough remains elusive for Russia is that defense is by far the dominant position in the war. Evolving technological developments with unmanned systems have made mechanized ground offensives extremely costly and allowed Ukraine to maintain strongpoints with fewer troops.1 The Russian military has tried to overcome inherent defensive advantages by pressing offensives that are insensitive to human costs. Although these “meat assaults” have regularly been reported to wear down Ukrainian positions at the tactical level, they actually tend to create a vicious cycle that makes Russia’s strategy of grinding it out relatively ineffectual in the war.
2. ECONOMIC INDICATORS WORSEN IN RUSSIA
Russian Banks Allegedly Preparing for Bailouts
A July 17 report by Bloomberg alleges that several of Russia’s biggest banks have been holding consultations on the need for potential bailouts by the Bank of Russia within the next 12 months.
Moscow Preparing to Bailout Coal Companies
Russian Finance and Energy Industries are preparing an $800M aid package to prop up the country’s coal industry. Companies will receive tax and insurance deferrals until the end of November 2025 as part of the plan. So far seven coal-producing and refining companies have received government aid, and another 40 companies are being evaluated for assistance.
Russia Cancels Top Arms Expo
Russian media outlet Izvestia reported this week that the Russia’s annual International Military-Technical Forum is cancelled. According to Izvestia the event also known this year as “Army 2025” is “the main exhibition event of the Russian Ministry of Defense, which has been held annually since 2015 in Patriot Park.”
India Signals Willingness to Dump Russian Oil and Gas
This week New Delhi indicated its readiness to stop buying Russian oil and gas in the event of US secondary sanctions. India’s Minister of Petroleum and Natural Gas Hardeep Singh Puri announced that the country was prepared to find new sources of energy products and was not concerned about the effects of secondary sanctions.
Takeaways:
The Russian economy, which has shown resilience through nearly three and a half years of war, is starting to show the effects of prolonged stress. Threats to the Russian economy are coming from weak demand for many industries caused by sanctions denying Russia access to markets, as well as from prolonged periods of high interest rates. The combination of weak demand and high interest rates risks surging budget deficits amid a growing need for state intervention to prop up key sectors of the economy.
Weak demand - Evidence of reduced demand for Russian goods has been accumulating in the past several months. In May, Russian Railways, the country’s state monopoly for railroads, reported that rail traffic in 2024 experienced a year-on-year decline of 8.6%, falling to a 16-year low. Even demand for Russian steel, a product that should be buoyed by dramatic increases in Russian defense spending, was down 3% annually in February 2025. The canceling of “Army 2025” is yet another sign of declining foreign interest in another top Russian export—arms.
This already weak demand across key sectors of the Russian economy makes India’s suggestion that it will stop buying Russian oil and gas particularly worrying to the Kremlin. India is currently one of the top importers of Russian fossil fuels, purchasing 19% of Russia’s coal exports and 38% of its oil exports.
High interest rates - Instituted by Russia’s Central Bank to fight inflation, interest rates, now at 20%, are beginning to pose a serious threat to industries outside the Russian financial sector. The raised rates have made paying down debt a much larger portion of company spending across the Russian economy. This partly explains the dire situation facing Russian coal, where growing debt expenses in the sector are threatening to consume company budgets as their revenues shrink. Statistics provided by the Bank of Russia (below) indicate that interest expenses climbed by as much as 50% in some industries between 2023 and 2024.
Percentage of large Russian companies overall expenses consumed by interest payments. Source: Bank of Russia, Financial Stability Review 2024 Q4–2025 Q1 A consolidation of Russian industries is expected in the near future through distressed asset mergers and acquisitions. However, the systemic nature of threats facing Russian industries has led to suggestions that the Russian state needs to cut its budget and prepare to support its banking sector ahead of a wave of loan defaults.
3. CHINA AND US DUEL OVER CHIPS AND AI
Malaysia Announces Crackdown on Exports of Chips
On July 14, Malaysia’s Ministry of Industry, Trade and Investment (MITI) announced that it was tightening regulations on the transit of all advanced US chips through the country. Malaysia is a source of significant smuggling of advanced chips into China.
China Plans Massive AI Industrial Area in Xinjiang
This week Bloomberg released a report detailing China’s plans for the development of an Artificial Intelligence Industrial Zone in Xinjiang. The report alleges that China’s race to beat the US in AI means the industrial zone will rely heavily on coal power, forced labor, and over 100,000 advanced Nvidia chips.
US to Allow Exports of Advanced Nvidia Chips to China
This week Nvidia’s CEO Jensen Huang announced that the company received approval to export its advanced H20 chip to China. The chips will be watered down versions of their original that are specially licensed for sale in Chinese markets.
Takeaways:
Two sets of interests are dueling over US policy regarding chip exports to China. Chip designers like Nvidia and AMD believe they need to sell some chips to China to stay competitive. On the flip side, US AI companies like Anthropic have argued that exports of advanced semiconductors to China help US AI companies retain a lead in the space by constraining Chinese development. US policymakers are trying to tread a fine line of satisfying both concerns as part of a trade deal with China.
Massive AI infrastructure projects will help China advance in AI by driving down costs for Chinese Large Language Models (LLMs), but it’s not clear that this is a key line of effort for beating its US competitors over the long term. China has established itself as an AI leader in emerging markets with cheaper AI products. But this advantage may not endure as the greatest long-term global advantage may accrue to AI products that hallucinate less often and have greater range in their data sets.
At present hallucinations are expected with AI models, but that will change over time as LLMs become more complex and more incorporated into everyday tasks and key industries. Incorporating AI into critical infrastructure will require trust. Chinese AI models will be trusted and perhaps lead the world in certain economic sectors, buoyed by China’s ability to harvest data through its massive surveillance state. Over the long run however, the overall most reliable LLMs are likely to be produced by open societies with more robust intellectual property protections, and less state subsidies. This is because the key factors determining AI competitiveness in coming years are unlikely to be energy or the size of datasets (variables that are likely to even out over time,) but rather data integrity.
Ruthless competition for large consumer and business markets in free markets is likely to weed out or reform models whose data integrity is questionable (such as ones that declare themselves “MechaHitler”) regardless of how much state support they receive in contracts or subsidies.
The problem with the integrity of data in Chinese LLMs is already apparent. This week investigative Journalist Christo Grosev identified new issues with China’s Deepseek AI, alleging the platform not only suggests but actively alters user-generated content in favor of Russian disinformation.
Source: Christo Grosev (@thechristofiles) on YouTube
4. IRAN REMAINS DEFIANT AMID SETBACKS TO ITS NUCLEAR PROGRAM AND SEEKS SUPPORT FROM RUSSIA AND CHINA IN NEGOTIATIONS
New US Intel Reports that Iran’s Nuclear Program Suffered Significant Setbacks from Strikes
US strikes destroyed Iran’s deeply buried Fordow nuclear site according to a new US intelligence assessment. The report suggested that the other sites struck by the US at Isfahan and Natanz, were not as badly damaged overall but had key research facilities destroyed. The report assessed that though strikes did not completely “obliterate” Iran’s nuclear program, they likely set back its nuclear research and development by years.
Iran Vows to Defy Threat of Sanctions “Snapback”
On July 18, Iran’s Foreign Minister Abbas Araghchi warned that the “snapback" of sanctions on the country by European signatories to the 2015 Joint Comprehensive Plan of Action (JCPOA) would jeopardize future cooperation. The remarks were a response to a July 15 announcement by the US, France, Germany and the United Kingdom that sanctions lifted under the JCPOA would be restored at the end of August if no new nuclear deal was reached.
Iran Seeks Security Guarantees from Russia and China
This week Iran’s Foreign Minister Abbas Araghchi met with both Russian and Chinese officials on the sidelines of the Shanghai Cooperation Organization (SCO) Foreign Ministers Forum. There Araghchi also called on the SCO to form a collective security agreement. Iranian officials also met with representatives of China and Russia in Vienna to discuss a response to US strikes. In both venues Chinese and Russian officials affirmed their continued support for Iranian sovereignty and denounced the US for attacks on the country.
Takeaways:
Iran is in a precarious position following years of strategic setbacks punctuated by devastating strikes on its military and nuclear program by the US and Israel. The Iranian regime has no choice but to appear defiant, however it has limited options to cope with unrelenting military, diplomatic and economic pressure from the US and its allies.
Iranian leaders are trying to receive basic assurances that Russia and China will prevent the country from being squeezed too tightly by the US in upcoming talks. They are also likely trying to assess the willingness of both countries to back Iran’s demands to continue nuclear enrichment programs.
5. SECOND STRATEGIC DIALOGUE BETWEEN RUSSIA AND NORTH KOREA HELD IN WONSAN
On July 13, Russian Foreign Minister Sergei Lavrov concluded three days of talks with Kim Jong-un and other top North Korean officials at a new beach resort in the coastal North Korean city of Wonsan. The talks deemed the “Second Strategic Dialogue,” pledged to deepen cooperation between the two countries and warned against the formation of a tripartite alliance between the US, South Korea, and Japan to deter aggression from North Korea.
Takeaways:
It is unclear what agreements were made during the talks, however previous high-level summits between Russia and North Korea have been followed by exchanges of military assistance. It is possible that a new and larger deployment of North Korean combat troops will follow, such as one that South Korea’s National Intelligence Service has reported is planned for August.
The United Kingdom’s Royal Uniform Services Institute’s Jack Watling and Nick Reynolds suggest in a February 2025 report “Tactical Developments During the Third Year of the Russo–Ukrainian War” that both Ukraine and Russia are now able to use platoon-sized units (30-40 soldiers) to defend positions previously designed for companies (90-120 soldiers)