Will the wheels come off Nato?

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0:32Good morning from the Financial Times. Today is Tuesday, June 24th, and this is your FT News Briefing. There may be temporary peace in the Middle East, and investors are really coming around to emerging markets. Plus, NATO is meeting in The Hague this week with a bit of an identity crisis. The way to see NATO right now is like a wheel. America is the hub, and European countries are the spokes. If you take out the hub, that wheel collapses. I'm Mark Filippino, and here's the news you need to start your day.

1:09U.S. President Donald Trump says Iran and Israel have agreed to a, quote, complete and total ceasefire. The president posted the announcement on his Truth Social network on Monday night. Israel first struck Iran a little over a week ago, and the U.S. hit Iranian nuclear sites over the weekend. Iran has retaliated against Israel, and yesterday launched missiles at a U.S. air base in Qatar. The Pentagon said it wasn't aware of any damage, but Iran claims missiles did hit the base. The price of oil has been whipsawing through all of this, and yesterday the cost of Brent crude dropped more than 7%.

1:42That was its biggest one-day drop since August of 2022.

1:54So those U.S. strikes on Iran over the weekend, did they actually destroy Tehran's nuclear program? That's been the big question since America's military joined Israel to bomb key facilities. But the answer is, well, it's complicated. And a lot of it depends on a stash of enriched uranium. Here to talk to me about it is the FT's Middle East editor, Andrew England. Hey, Andrew. Hi, how you doing? I'm doing well. So first of all, Andrew, tell me about the stash. What are we looking at here? Well, Iran has been expanding its uranium enrichment program since about 2019. They've been enriching at about up to 60 % purity, which is very close to weapons grade.

2:34It's normally regarded at 90 % purity as weapons grade. And so they've been going pretty much close to that. Before the war started, Iran had amassed about 408 kilograms of this uranium enriched to 60%. That's enough fissile material, if it was further enriched to 90%, to produce about 10 nuclear bombs if they chose to go down that path. Got it. And what do we know about its location? Is it in one spot? Is it spread out? What experts tell me is that essentially it was in three locations before Israel started its war with Iran about 10 days ago. So Fordow is the main plant used to enrich uranium to 60 % purity.

3:18Natanz is the second main site. And then there's another site called Isfahan. And it's worth remembering that IAEA inspectors, UN watchdog inspectors, were able to visit these sites. Yeah, the IAEA, the International Atomic Energy Agency. And Andrew, where is all this enriched uranium now? This is a great question. We don't know. We assume that the Iranians knew that Natanz was definitely going to be bombed. Fordow would be bombed. It's deep underground in the mountains. So Israel didn't have the military capacity to attack it alone. And that's when the US joined the conflict and dropped 30 ,000 pound bunker buster bombs on it.

3:56But we can assume that the Iranians prepared for all contingencies and so more than likely moved it. And just to be clear, if Iran can still access this enriched uranium pretty easily, how long might it take for Tehran to potentially make a nuclear weapon? Well, Iran always says its nuclear program is for civilian, peaceful purposes. But the fear has been that they could have installed advanced centrifuges in undeclared covert sites, ramping up their nuclear activity and producing uranium to the highest levels of enrichment they've ever done. I should say that the weaponization process is a whole other matter, and it would take months, up to a year, experts say, to actually weaponize it.

4:41So it's one thing having the fissile material required to produce a nuclear bomb. It's another matter having the skills and expertise and the technologies to weaponize it in a way that could actually be deployed. So Andrew, just plainly, it sounds like there isn't too much of a threat coming from Iran's nuclear program at the current moment, but it could escalate over the course of time. Is that what I'm hearing? Yeah, I think what experts would tell you is one of the risks with a bombing campaign against the nuclear sites is it doesn't get totally destroyed. You can't destroy the research, technical know-how experience that Iran has built up over these last few years, and that if Iran is still able to retain this highly enriched uranium, and if it still has facilities, then there is a risk that if Iran chose to weaponize its program, then yes, it could.

5:36That's the FT's Andrew England. Thanks so much, Andrew. Thank you.

5:46Emerging markets are outshining those in developed countries, which is surprising given that analysts initially expected U.S. President Donald Trump's trade war to hit them the hardest. A J.P. Morgan index of the local currency bonds of large emerging markets is up around 10 % so far this year. Investors have warmed up to these emerging markets over the past few months. They want to diversify away from dollar assets because they're worried about how erratic U.S. policy is. And emerging market assets have, in fact, held on to their gains despite strikes by Israel and the U.S. on Iran. In fact, investors across the board haven't really flinched.

6:30The annual NATO summit kicks off today, and the military alliance is facing quite a bit of uncertainty. Can it keep the U.S. around? And if it can't, can Europe still defend itself? I'm joined now by the FT's Brussels bureau chief, Henry Foy, to unpack this. Hey, Henry. Hey, Mark. So heading into the summit, where do things stand between the U.S. and the rest of NATO? Because last time we checked in, things were pretty tense. So on paper, Donald Trump and his administration are saying, look, the U.S. remains committed to NATO. However, they put a price on that commitment. That price is 5 % of GDP spent on defense.

7:09This is what Donald Trump has been saying for a very long time now. It's now a formal demand. And if you want America to remain in NATO, if you want to benefit from the security blanket that America's thrown over Europe for the best part of the last 80 years, you've got to pay up. And is Europe going to do that? Is it going to pay up? Well, it looked sort of weeks ago that Mark Rutter, the Secretary General of NATO, had inched towards this beautifully delicate compromise where of that 5%, 3.5 % would be on core defense spending, 1.5 % would be on other issues like cyber and military mobility. By 2035, everybody would be hitting 5%.

7:48However, just before the summit, indeed on Sunday, Pedro Sanchez, the Prime Minister of Spain, received this opt-out, if you like. That's caused a bit of a stink amongst the other European members of NATO, some of whom, more hawkish members, people like Poland, are saying, this is not fair. Spain's got to pay as much as everybody else. Other countries, the more dovish ones, countries like Belgium, are saying, well, if Spain's getting an opt-out, we'd quite like the same. So it does remain to be seen how this comes out in the summit. And I think it could boil over into something of a bun fight if countries feel that it's not a fair and equal distribution.

8:23Henry, why is this causing such a problem? Well, the first thing is 5 % is not going to be easy for the vast majority of European countries. There's high deficits already. The other thing is, even if Europe increases its spending to this level, there's no guarantee America is going to maintain the same amount of military presence in Europe. Indeed, Donald Trump and many of his administration have said that in the long term, America is going to be moving capabilities, troops, weapons, specific intelligence capabilities out of Europe and shifting them to Asia. You only have to look at what's happened in the Middle East in recent weeks to see how America sees itself as a global military power that can't just focus on protecting Europe anymore.

9:0430 ,000 foot view, Henry, how would this shift in US foreign policy change how NATO operates as a group? Well, in the reporting we've done in recent weeks, we talked to a lot of experts, one of whom said, look, the way to see NATO right now is like a wheel. America is the hub and European countries are the spokes. If you take out the hub, that wheel collapses. There is no European alternative to the hub. So if Donald Trump and if America long term is committed to withdrawing those central coordinating capabilities out of European defense, Europe needs to completely rethink how it manages itself.

9:42It needs to create a core, if you like, of countries who are willing to step up and manage the military defense of all the others. And that requires a whole different mindset. I mean, countries like France, Germany, Britain, Poland, Turkey are big, committed, capable defense powers. But right now, they can only work together if there's America in the middle coordinating them all. That's the FT's Henry Foy. Thanks as always, Henry. Thanks so much.

10:12You can read more on all these stories for free when you click the links in our show notes. This has been your daily FT News Briefing. Check back tomorrow for the latest business news.

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