Good morning. Last week, the Trump administration unveiled what it billed as an "Economic D-Day" aimed at forcing Iran to reopen the Strait of Hormuz and return to the negotiating table.
But the experience of Western sanctions and economic pressure on autocracies such as Cuba, North Korea, Venezuela and Syria shows the challenges facing Washington in trying to bend Tehran to its will. Indeed, the strongmen ruling such countries have historically used a mix of violence, economic adaptation and political suppression that enables them to withstand economic pain for years, if not decades.
How they adapt: Autocratic countries adapt in various ways. Sanctions typically push activity underground, creating flourishing black markets for goods, services and even people. Dictators also use outside pressure to rally their populations, especially among elites.
Examples from U.S. adversaries: The government in Cuba has relied on the country's diaspora to bring in food and medicine even as Washington raises pressure on Havana. North Korea boosts its coffers by stealing cryptocurrency and even tricking Americans into working for them in U.S. companies. Russia has reoriented its trade flows toward China and other non-Western powers. Tehran's trade has grown with countries with which it shares a land border. Iran has also created an entire parallel financial system with China, bypassing the U.S.-led banking system and weakening Washington's enforcement powers.
Use of force as a tool: Sometimes it requires direct military action to unseat autocrats, as when U.S. forces captured Venezuela's former leader Nicolás Maduro in January or rebel forces in Syria pushed former President Bashar al-Assad from power in December 2024.
Mixed results: "The fact that the U.S. can inflict pain is a given," said Djavad Salehi-Isfahani, an economist at Virginia Tech. "My feeling is that these pressures aren't going to result in more pressure on the Iranian government to compromise."
What might work? Economic pressure needs to be coupled with diplomatic campaigns to squeeze an autocratic regime, said Aaron Arnold, a former expert on the United Nations panel monitoring sanctions enforcement against North Korea. "These kinds of levers by themselves may not be the most effective tools," said Arnold, who is now at the Royal United Services Institute, a London think tank.
Compliance
Founder of private-company investment firm charged with defrauding investors.
The founder of private-stock investment firm Linqto has been charged with defrauding tens of thousands of investors to whom he marketed investments in shares of pre-IPO companies.
The charges: Linqto founder William Sarris is accused of manufacturing false scarcity of private company shares to drive up prices. Prosecutors allege he pushed markups beyond what his own lawyers warned him was lawful to boost his company's revenue. He was charged this week with securities fraud, broker-dealer fraud, wire fraud and conspiracy. A lawyer for Sarris said he "is innocent of these charges and intends to fight them."
U.K.'s SFO settles with Kazakh miner over botched bribery investigation.
The U.K.'s Serious Fraud Office settled a lawsuit brought by Kazakh mining firm Eurasian Natural Resources Corporation, reports Risk Journal's Yusuf Khan (free link).
The SFO investigated ENRC between 2013 and 2023 over suspected bribery and corruption linked to mining assets in the Congo, but ended without charging the miner because of insufficient admissible evidence. The ENRC brought a civil claim against the SFO and its former lawyers in 2017 and 2019 respectively, where the court found the SFO was in breach of its duties, including engaging with and taking unauthorized information between 2011 and 2013. The court also found the SFO's investigation wouldn't have opened had the misconduct not taken place.
Big potential settlement. ENRC sought $290 million in damages related to the botched investigation by the SFO as well as for unnecessary legal fees, increased borrowing costs and other expenses it incurred as a result of a more than 10-year inquiry. The SFO refused to provide details on the financial terms of the settlement because of confidentiality agreements.
The U.S. government has filed a statement in support of OpenAI in its legal battle with the New York Times and other publishers, arguing that training on news content is within the bounds of "fair use" under U.S. copyright law.
A federal judge on Wednesday rejected the Justice Department's request to dismantle Google's online advertising business, the second time a court has denied government efforts to break up the company after it was found liable for engaging in illegal monopoly tactics.
The U.S. is proposing new rules for importers of goods into the country, including using advanced technology to track supply chains and restricting a Chinese logistics platform over national security concerns, Risk Journal reports (free link).
The Attorney General of New Jersey has asked the U.S. Supreme Court to hear a case that could determine the fate of sports prediction markets.
Citibank has agreed to settle with the U.K.'s sanctions watchdog over allegations that it processed hundreds of prohibited transactions linked to Russia (free link).
Victims from the Tumbler Ridge massacre filed 30 lawsuits against OpenAI over its failure to alert police about ChatGPT interactions with the suspect months before the February mass shooting in Canada.
The U.S. has seized more than $560,000 in cryptocurrency donations destined for the Palestinian militant organization Hamas and said that it has taken over a number of websites and servers used to solicit funds and recruits for the group (free link).
Microsoft is changing its reporting structure from three segments to two, named Agents and Infra, and Devices and Consumer, as the company responds to changes brought about by artificial intelligence.
The NBA on Wednesday delivered one of the harshest penalties in league history to the Los Angeles Clippers, owned by Steve Ballmer, for what it called a "flagrant violation" of its salary-cap rules.
China's trade surplus in 2025. A G-20 statement issued Tuesday implicitly criticized China by calling on countries with persistent surpluses to end policies causing an overreliance on exports.
Risk
U.S. says it's fed up with China's overcapacity-and more countries agree.
American concerns about China's manufacturing and export juggernaut have gone global.
Pressure expands: A Group of 20 statement implicitly criticizing Beijing for its overreliance on exports for growth marks a new stage in international pressure. The statement, issued Tuesday at the G-20 meeting of finance ministers and central-bank chiefs in Asheville, N.C., was a striking example of agreement in an otherwise-fractious affair that featured disputes over Russia and President Trump's policy toward Canada.
Winter is approaching and Europe is running low on natural gas.
Europe has put off buying natural gas for the winter in a big, potentially risky bet that the Iran war will be over soon and prices will drop.
Gamble on shorter war: The European Union's gas storage facilities are only 65% full, their lowest level toward the end of summer in at least 15 years. Companies have been reluctant to buy gas for storage because they anticipated that Qatar, the world's second-largest exporter of liquefied natural gas, would be able to resume normal shipments through the Strait of Hormuz this year once the conflict dies down. Now, prospects for a clear end to the war before winter are fading, driving up LNG prices to a 31/2-year high this week.
The U.S. is stepping up its search for metals sourced from the deep sea, announcing new investment in the Pacific as part of a broader effort to derisk its mineral supply chain, Risk Journal's Yusuf Khan reports (free link).
President Trump urged oil executives to build more U.S. refineries to help lower gasoline prices before the November midterm elections. But U.S. refinery operators have no plans to expand their fleets because they don't expect the current period of high profitability to last.
Russia's increasingly brazen string of small-scale attacks in Europe creates a dilemma for the continent's leaders: Are they ready to respond to Moscow with more than sanctions and diplomatic wrist-slaps? The answer is not yet.
Israeli special forces captured senior Hamas official Moein Al-Arabid in Gaza City during a daylight raid on Tuesday.
China has spent years building a relationship with Nepal, boosting trade and gaining influence with its small Himalayan neighbor. After deadly mudslides and flooding raged through part of their shared border last week, China is now under pressure to show its growing embrace can help Nepal, too.
BP appointed its interim chairman, Ian Tyler, to the role permanently, making him the company's third chair in less than a year. The appointment ends a three-month search following the May removal of former chairman Albert Manifold over governance and conduct concerns.
Volkswagen CEO Oliver Blume is considering bypassing the company's supervisory board to take a cost-cutting plan directly to shareholders. The proposal faces strong opposition from worker representatives and the local government of Lower Saxony, which holds a 20% voting stake.
Events
Join senior risk, compliance and security leaders at Dow Jones Global Horizons , Sept. 14-16 at Christ Church, Oxford. Explore the forces shaping the global landscape through expert-led conversations, off-the-record discussions, networking and exclusive dinners at Christ Church and Blenheim Palace. A 35% discount is available exclusively to Morning Risk Report subscribers. Request your invitation today . Registration requests are subject to approval.
What Else Matters
New details of the Trump administration's nuclear agreement with Saudi Arabia are drawing criticism over potential proliferation risks. The accord outlines a road map that could eventually allow uranium to be enriched in Saudi Arabia up to a level of nearly 20%.
A Coast Guard plane carrying Homeland Security Secretary Markwayne Mullin made an emergency landing at Reagan National Airport on Wednesday. The Gulfstream C-37A jet diverted to the Washington, D.C.-area airport after its right engine failed and caught fire.
Tech executives and Trump administration officials urged G-20 policymakers to minimize artificial-intelligence regulations to avoid slowing growth.
New York City is banning the use of artificial intelligence in public school classrooms through middle school for one year while officials study the impact of the technology.
About Us
Follow us on LinkedIn. Send tips to our reporters Max Fillion at max.fillion@dowjones.com, Clara Hudson at clara.hudson@wsj.com, Yusuf Khan at yusuf.khan@wsj.com and Richard Vanderford at richard.vanderford@wsj.com.
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