Insight: What is happening in Europe and Asia in January 2026?

The month of January marked the start of the year with escalating security cooperation, legislative and governance shifts, along with intensifying competition over trade and critical infrastructure. In Asia, developments are marked by deepening defence alignments in the Indo-Pacific region accompanied by renewed U.S. security commitments to Taiwan, to political consolidation and expanding economic influence across parts of Asia. On the other spectrum, Europe faced parallel challenges as energy disruptions linked to ongoing conflict, domestic political deadlock, and debates over strategic autonomy tested the European Union’s internal resilience while regulatory measures and trade diversification reshaped its external economic posture. Taken together, developments across both regions in January 2026 were marked less by resolution than by strategic adjustment, as states and institutions sought to balance internal stability with external credibility in an international environment defined by sustained geopolitical strain.

Asia:

1. Japan and Philippines Deepen Defense Ties With New Security Agreements

   FA - On January 15, Japan and the Philippines signed multiple defence agreements in Manila, marking a significant expansion of their security partnership amid escalating regional tensions linked to China’s assertiveness in the East and South China Seas. The central pact, an Acquisition and Cross-Servicing Agreement (ACSA), creates a framework for mutual logistical support, allowing their armed forces to share fuel and other supplies during joint operations and humanitarian missions. ACSA complements the Reciprocal Access Agreement (RAA), which entered into force last year and permits force deployment between the two nations. Japan also pledged substantial Official Security Assistance funding to bolster Philippine defence modernisation and infrastructure in strategic southern islands. Both governments framed the deals as enhancements to military interoperability and readiness, underscoring shared commitments to a rules-based regional order even as they refrain from naming China explicitly. (Japan Times, The Diplomat, CNN)

   
   

2. US House Passes $300 Million Military Aid Package for Taiwan

   FA - The United States House of Representatives approved a spending bill that includes US$300 million in Foreign Military Financing (FMF) for Taiwan, embedded within the broader National Security, Department of State, and Related Programs Appropriations Act for 2026. Under the legislation, the FMF is intended to help Taiwan procure American defence equipment and training to deter coercion in the Taiwan Strait. The package also authorises up to US$2 billion in loan guarantees and loans for Taiwan, alongside additional funds for the American Institute in Taiwan and other Indo-Pacific security initiatives. The measure passed the House with bipartisan support and now awaits Senate action to clear the full appropriations process. It reflects ongoing U.S. legislative efforts to strengthen Taiwan’s defensive capacities amid sustained cross-Strait tensions. (US Congress, South China Morning Post)

   
   

3. US Announced Phase Two of Gaza Ceasefire Amid Doubts Over Long-Term Impact

   FA - In mid-January, the United States announced the transition to Phase Two of its Gaza peace plan, shifting from a ceasefire toward demilitarization, interim technocratic governance, and reconstruction of the war-torn enclave. Phase Two includes establishing a 15-member National Committee for the Administration of Gaza (NCAG) to manage daily civilian affairs and begin efforts to disarm unauthorized armed groups. The plan is backed by mediators Egypt, Qatar, and Türkiye, with Egypt and others supporting the new governance body’s deployment to Gaza. Implementation remains uncertain. Although the ceasefire has held in part, repeated violations and ongoing violence underscore the fragility of the transition. While Hamas’s resistance to full disarmament and internal Palestinian political divisions pose structural obstacles. The disarmament requirement and the return of the final hostage’s remains are tied to progression, and French officials urged all parties to honour commitments to avoid derailment. (Chatham House, Al Jazeera, BBC)

   
   

4. Vietnam’s Ruling Party Opens Congress to Decide Next National Leadership

   FA - Vietnam’s Communist Party convened its 14th National Party Congress in Hanoi in January, a pivotal event that will shape the country’s leadership and policy direction for the next five years. Party delegates are tasked with electing the Central Committee and Politburo, which will in turn decide key state positions, including the general secretary and the presidency. Incumbent Party General Secretary To Lam is widely expected to retain his leadership role and may also ascend to the presidency, consolidating power within the party’s top echelon. Beyond leadership selection, the Congress is setting ambitious strategic priorities, including double-digit GDP growth targets and continued emphasis on security, foreign diplomacy, and economic modernization. The event also underscores the party’s unchallenged political dominance in Vietnam, with debates over the balance between reform, state control, and private sector expansion shaping internal policy directions. (Reuters, BBC)

   
   

5. China Expands Economic Footprint Across Central Asia

   FA - China is expanding and restructuring its economic footprint across Central Asia, with growing activity in joint ventures, corporate takeovers, and manufacturing investment, particularly in Kazakhstan and Uzbekistan. Chinese firms have moved aggressively into mining and industrial assets in Kazakhstan, acquiring stakes in silver, lead, tungsten, and uranium deposits, while manufacturing projects worth over US$100 million have been announced in western regions of the country. In Uzbekistan, the number of Chinese companies and joint ventures more than doubled between 2023 and 2025, making China responsible for over a quarter of all foreign corporate entities operating in the country. Beyond extractive industries, China’s engagement is increasingly diversified and institutionalized, with investment shifting toward manufacturing, renewable energy, logistics and training programmes, alongside expanded transport corridors and rail connectivity. Analysts note that while China has overtaken Russia as Central Asia’s largest trading partner, the two powers occupy largely distinct economic roles, reducing direct competition. This evolution reflects both China’s domestic pressures to diversify supply chains and Central Asian governments’ interest in value-added growth, positioning the relationship as one of growing structural interdependence rather than short-term resource extraction. (China Global South Project, Straits Times, Eurasianet)

Europe:

1. Trump’s Greenland Tariff Threat Sparks EU Debate on Retaliation

   FO - In January 2026, the Trump administration issued a formal threat to impose punitive tariffs ranging from 10% to 25% on European exports to the United States. This economic pressure is explicitly linked to a demand for the sale of Greenland or a substantial "security repayment" from Denmark and its EU allies. Washington justifies this move as necessary compensation for decades of US-funded NATO protection, framing the alliance's security umbrella as a debt that European nations have failed to settle through traditional means.
   

   The emergence of what may be described as “transactional imperialism” represents a significant development for the European Union, raising questions about the sustainability of a security architecture shaped by asymmetric dependencies rather than reciprocal partnership. The increasing treatment of long-standing alliances as negotiable arrangements — potentially involving territorial or strategic concessions — has implications for the cohesion and credibility of NATO. For the EU, responding to these dynamics extends beyond trade policy considerations and touches upon broader concerns related to territorial integrity and political autonomy. In the absence of a coordinated and unified response, the Union may face increased strategic vulnerability, creating opportunities for other global actors, including Russia and China, to expand their influence within an evolving international order where leverage increasingly shapes leadership claims. (Council on Foreign Relations, Reuters, The New York Times)

2. European Union and Mercosur Seal Landmark Trade Pact After 25-Year Stalemate

   FO - On 17 January 2026, the European Union and the Mercosur—comprising Argentina, Brazil, Paraguay, and Uruguay—formally concluded a comprehensive free trade agreement after twenty-five years of negotiations. The agreement establishes one of the world’s largest open-market zones, covering a combined population of over 700 million people. Its conclusion occurred against the backdrop of increasing protectionist discourse in North America and reflects the EU’s broader efforts to diversify supply chains and secure access to critical raw materials and agricultural markets. The Mercosur agreement can be interpreted as a step toward enhancing the EU’s strategic autonomy, particularly in the realm of trade policy. By expanding its network of external economic partnerships, the Union reduces its reliance on a limited number of markets and strengthens its capacity to manage external economic disruptions. This diversification may also influence the EU’s engagement with Asian partners by reinforcing its role as an autonomous and predictable multilateral actor. Moreover, the agreement reflects an approach to trade competitiveness grounded in regulatory standards and product quality, enabling the EU to support internal markets and agricultural sectors without escalating confrontational trade practices. (European Union, Reuters, Al Jazeera)

3. France Enters 2026 Without Budget Consensus as Political Deadlock Deepens

   FO - In January 2026, France entered a period of heightened political and economic uncertainty following the failure to secure parliamentary approval for the national budget. This legislative impasse coincided with significant cyber-attacks on critical financial and postal infrastructure, including La Banque Postale and La Poste. As a result, the government relied on emergency administrative measures to maintain basic economic and public service functions, while disruptions to digital banking and postal services affected a large segment of the population. France’s domestic instability has broader implications for the European Union, given its role as one of the Union’s central political and economic actors. Prolonged internal governance challenges may constrain France’s capacity to contribute effectively to collective EU initiatives, particularly in the areas of security coordination and external engagement, including in the Indo-Pacific. This situation highlights how internal political and infrastructural vulnerabilities within key member states can affect the EU’s overall strategic coherence and external credibility. Consequently, sustaining the Union’s global role depends in part on the institutional resilience and political stability of its most influential members. (French Entrée, RFI)

4. Ukraine Faces Winter Energy Crisis After Renewed Russian Strikes

   FO - In mid-January 2026, Volodymyr Zelenskyy declared a nationwide energy emergency following sustained Russian strikes on electricity grids and heating infrastructure, which resulted in widespread service disruptions across Kyiv and several other urban areas. During the same period, maritime security concerns intensified in the Black Sea after the Kazakh-chartered tanker Matilda was reportedly affected by drone-related activity, temporarily disrupting the transport of Central Asian energy supplies to European markets. These developments highlight the growing centrality of energy infrastructure within contemporary security dynamics. Attacks on electricity and heating systems demonstrate how energy networks have become critical to civilian resilience and state functionality, particularly in wartime contexts. The disruption involving the Matilda further illustrates the interconnection between European security challenges and broader Eurasian energy supply chains. For the European Union, this underscores the importance of treating maritime routes and energy infrastructure as strategic assets requiring coordinated protection. Strengthening technical and institutional mechanisms for infrastructure security may therefore be essential to sustaining the Union’s energy security and broader strategic autonomy. (United Nations, Al Jazeera, Reuters, BBC)

5. Cyprus Sets 2026 EU Presidency Agenda Around Migration, Security, and Resilience

   FO - The Republic of Cyprus officially presented its priorities for the Council of the European Union Presidency (January – June 2026), focusing on "Strategic Autonomy," maritime security, and the implementation of the Pact on Migration and Asylum. President Nikos Christodoulides emphasised that the EU must address internal social crises, specifically the housing shortage and declining birth rates, while utilising strategic enlargement (Ukraine, Moldova, Western Balkans) as a defensive tool.

   The Cypriot Presidency reflects an effort to enhance the EU’s institutional effectiveness by linking internal social resilience with external security objectives. By situating issues such as housing policy within a broader security framework, Cyprus underscores the relevance of domestic stability for the Union’s capacity to act internationally. The emphasis on strategic enlargement further positions accession policy as a tool for reinforcing stability in the EU’s neighbourhood. Tied together, these priorities suggest an attempt to strengthen the EU’s coherence and credibility as an external actor, including in its engagement with Asian partners across trade and security domains. (EU Cyprus Presidency, European Commission, Brussels Times)

6. The Carbon Border Adjustment Mechanism and Emerging Trade Tensions in EU External Relations

   FO - On 1 January 2026, the Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase, marking the full implementation of the world’s first carbon border tax. In the first weeks of the year, over 98% of the declarations processed involved steel and iron imports from major Asian exporters, including China, India, and Türkiye. These nations have responded with formal complaints, labelling the levy as "green protectionism" and a violation of multilateral trade rules.

   
   

   The implementation of CBAM is a definitive assertion of "sovereignty through standards," where the EU uses its market power to force global industrial change. By imposing a carbon price on imports, Europe is effectively telling the world that access to its 450 million consumers is a privilege reserved for those who meet its ethical and environmental criteria. While Asian partners view this as a unilateral "entry fee," for the EU, it is a necessary move to protect its own industry from being undermined by "colonial-style" external competition. This "green levy" represents the EU at its most assertive: a technical and innovative power that no longer asks for permission to set the rules of the global market, but instead dictates the terms of engagement for the 21st century. (European Commission, OECD, Centre for Strategic and International Studies, Financial Times)

Contributors:

FA: Francesca Villanueva

FO: Francesco Palmieri