Where NATO’s biggest future threat may lie

The questions about Nato’s long-term utility [View in browser]( [Bloomberg]( NATO was set up in the aftermath of World War II for several purposes, among them ensuring a European war could not happen again and keeping the Soviet Union at bay. Seventy years later, French President Emmanuel Macron declared it brain dead — out of date and out of touch. Russia’s invasion of Ukraine may have given the alliance a new lease of life as it responds to the most devastating land war in Europe since those times. It’s bulking up its military presence on Europe’s eastern flank, funneling weapons and expertise to Kyiv and providing a forum for renewed conversations about European-wide defense. Key Reading: [Solidarity or Squabbling: Five Things to Watch at NATO’s Summit]( [Biden’s Cluster Munitions to Ukraine Fuel Concern for Democrats]( [Biden, Erdogan Speak as US Seeks Deal on Sweden’s NATO Bid]( [China Looms Large as NATO Allies Debate Expanded Role in Asia]( Indeed Macron now says Russian President Vladimir Putin has “revived” the North Atlantic Treaty Organization with “the worst of electroshocks” — hundreds of thousands of people have been killed and wounded and millions displaced in Europe’s biggest refugee crisis in the past eight decades. Ukraine will certainly be front of mind when alliance leaders including US President Joe Biden meet this week in Lithuania. But questions remain about its long term utility, where the biggest challenge for NATO may not be Putin but a rising power much further from Europe’s shores — China. Some NATO members recognize this. There are efforts to bring leaders from the Asia-Pacific region into the conversation, with several attending the summit. And NATO is more willing to display a military presence — if mostly confined to joint drills — closer to China. But keeping NATO fit for purpose is no easy task. Some members are wary of stretching its geographic footprint given the challenges on the continent itself. There have also been concerns about pitching an alliance with a defensive remit into a broader tussle for influence between the US and China. NATO probably does need to engage because China’s expanding clout is a question for Europe, too. But some fret it risks becoming a vehicle for US foreign policy. NATO has become a household name again as it helps marshal Ukraine’s allies against Russia. And the conversation about China is for all sorts of reasons at a nascent stage. Still, it’s a crucial one when thinking about where NATO will be, and needs to be, a decade from now. — [Rosalind Mathieson]( German and Lithuanian soldiers during NATO exercise Griffin Storm on June 26. Photographer: Andrey Rudakov/Bloomberg Check out the latest [Washington Edition newsletter](. You can [sign up]( to get it in your inbox every weekday. And if you are enjoying this newsletter, sign up [here](. Global Headlines Europe’s defense contractors — flooded with demands for everything from ammunition to shoulder-launched missiles and combat vehicles — face [a dilemma]( almost 18 months into the war in Ukraine. Do they gamble on expanding production, assuming the war and tensions with Russia will last indefinitely? Or do they hold back until they get long-term commitments from governments that have spent decades cutting their defense budgets? - Russia’s top military [commander]( was shown on state television today for the first time since the abortive mutiny by Wagner mercenaries aimed at ousting him. - Follow our Ukraine [Recap]( for the latest coverage of the war. Two days of meetings between Treasury Secretary Janet Yellen and top officials in Beijing suggested there’s hope the US and China can set guardrails to [contain the damage]( from their intensifying rivalry. Yellen repeatedly sought to emphasize that deep and broad bilateral economic relations are a good thing, a message that may ease concern among US allies that Washington is aiming to fragment the global economy between an American and a Chinese bloc. - A group of Chinese female economists and entrepreneurs who dined with Yellen have been blasted by [online nationalists]( for betraying their country by interacting with the US official. Saudi Arabia’s decision to extend its oil production cuts as part of a bid to raise prices [may trigger a contraction]( in what was the Group of 20’s fastest-growing economy last year. It would be a stark turnaround for Riyadh, which oversaw economic growth of almost 9% in 2022, helping Crown Prince Mohammed bin Salman invest tens of billions of dollars in sports, tourism and new cities. North Korea threatened to shoot down US spy planes and accused Washington of engaging in “the most undisguised nuclear blackmail” by planning to bring a nuclear-armed submarine to the peninsula. South Korean President Yoon Suk Yeol said in an interview with the Associated Press that he will [seek help from NATO leaders]( on how to deter Pyongyang from increasing its atomic ambitions. Best of Bloomberg Opinion - [Europe Wasn’t Built for This New Era of War: Andreas Kluth]( - [What Beijing Just Doesn’t Get About Brussels: Matthew Brooker]( - [Thailand Has a Good Story to Tell. Really: Daniel Moss]( More than three years into a pandemic border lockdown, Azerbaijan shows little sign of easing the [travel curbs]( that most nations couldn’t give up fast enough. As Zulfugar Agayev reports, the nation whose neighbors include Iran and Russia long abandoned other Covid-related safety measures such as face masks. Land border controls have been a money spinner, however, because they close off the main channel for hard currency to leak out the country. Explainers You Can Use - [Rutte’s Dutch Government Has Collapsed: Here Is What’s Next]( - [Millions of Chinese Staying Home Shackle Southeast Asian Growth]( - [Critics Slam Lobbying by Tech Giants in Indo-Pacific Trade Talks](  Dutch Prime Minister Mark Rutte announced [he’s leaving politics]( after his coalition government collapsed amid infighting over migration policy. The resignation of the Netherlands’ longest-serving premier brings down the curtain on a career that placed him at the heart of European Union politics as the bloc’s leaders wrestled with the debt crisis, which was raging when he took office in 2010, a global pandemic and the war in Ukraine. Tune in to Bloomberg TV’s Balance of Power at 5pm to 6pm ET weekdays with Washington correspondents [Annmarie Hordern]( and [Joe Mathieu](. You can watch and listen on Bloomberg channels and online [here](. News to Note - President Ali Bongo announced his [candidacy]( for Gabon’s Aug. 26 elections, seeking to extend his family’s 55-year rule over the tiny oil-rich nation. - China is preparing to name a provincial law-enforcement official as the head of its agency overseeing Hong Kong, the South China Morning Post reported, a sign that [security remains]( Beijing’s priority four years after protests shook the financial hub. - Residents displaced by TotalEnergies SE’s $4 billion pipeline project in Uganda have been [inadequately compensated]( and had their lives disrupted, Human Rights Watch said. - US First Lady Jill Biden will travel to 2024 [presidential battleground]( states over the next two weeks to aid the White House’s effort to promote “Bidenomics.” Thanks to the 64 people who answered our Friday quiz and congratulations to Brian O’Keane who was the first to name Australia as the country in which a minister deleted a tweet that called former US President Donald Trump’s son a “big baby” after his speaking engagement was cancelled. And finally ... Ras Al Khaimah, a northern territory of the United Arab Emirates best known for its mountain peaks and ceramics company, is looking to [lure the rich]( from around the world. It’s pursuing an ambitious foreign direct investment strategy that’s attracting five-star hotels, industrialists and adventure-seeking tourists. As the swankier emirate of Dubai gets crowded, RAK is also likely to benefit from efforts to draw in more wealthy individuals via the UAE’s citizenship-by-investment program and plans for a super-yacht storage facility. The Rixos Bab Al Bahr hotel on Al Marjan Island in Ras Al Khaimah. Photographer: Christopher Pike/Bloomberg Follow Us Like getting this newsletter? [Subscribe to Bloomberg.com]( for unlimited access to trusted, data-driven journalism and subscriber-only insights. Want to sponsor this newsletter? [Get in touch here](. You received this message because you are subscribed to Bloomberg's Balance of Power newsletter. 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