PESTLE & MORTAR 05 March 2026

#1

This Week's Edition

Iran is dominating the geopolitical agenda this week. Many corporate risk and intelligence teams are understandably focused on developments there and the potential regional and market implications.

However, geopolitics does not pause because one crisis captures the headlines. Structural risks, policy shifts, and security developments continue to unfold across the world, many with direct implications for business.

This week’s PESTLE & MORTAR therefore continues to track the wider geopolitical landscape alongside developments in the Middle East.

For our latest analysis of the Iran situation, including forward-looking scenarios and implications for business, readers can visit the Insight Forward website, listen to our podcast and subscribe to the Strategic Memo.

#2

China’s National People’s Congress

China’s leadership convened the annual meeting of the National People’s Congress (NPC) in Beijing this week, where senior officials outlined the government’s economic priorities and policy direction for the coming year. The government is expected to maintain an economic growth target of roughly 5%, reflecting a balance between maintaining stability and acknowledging persistent economic headwinds, particularly in the property sector and domestic demand. Officials emphasized policies aimed at boosting household consumption, stabilizing the real estate market, and expanding investment in advanced technologies, including artificial intelligence, renewable energy, and high-end manufacturing. At the same time, leadership reiterated the importance of technological self-sufficiency, continuing a multi-year strategy to reduce dependence on foreign supply chains and strengthen China’s domestic industrial base. The policy signals coming out of the NPC indicate that Beijing remains cautious about deploying large-scale stimulus measures and instead prefers targeted interventions that support long-term structural objectives such as industrial upgrading and innovation capacity. Understanding these announcements is important because the NPC provides one of the clearest public windows into Chinese policymaking priorities and strategic direction. Although the NPC itself largely formalizes decisions already made by the Communist Party leadership, the economic targets, policy language, and sectoral priorities announced during the meeting reveal how Beijing interprets current economic conditions and where it intends to allocate political and financial resources. In this case, the emphasis on technology development, industrial policy, and domestic consumption suggests that Chinese leadership is prioritizing economic resilience and technological competitiveness over short-term growth acceleration.

#3

ISIS Using AI

Recent reporting indicates that the Islamic State, particularly affiliates such as ISIS-Khorasan, has begun formally encouraging recruits to use artificial intelligence tools as part of their operational and propaganda activities. Guidance circulated in jihadist publications reportedly frames AI as a tool that must be used “responsibly,” providing instructions on how militants can leverage chatbots and other AI systems while maintaining operational security. The guidance includes advice on using AI to assist with propaganda production, online outreach, and ideological messaging, while also warning recruits not to share identifying information with chatbots or expose operational details that could be traced by security services. Analysts note that the material effectively functions as an AI usage guide for militants, reflecting a shift from earlier skepticism toward digital technologies within some jihadist circles to an explicit embrace of AI as a force multiplier for recruitment, communication, and messaging.

Implications for terrorism over the medium term. The adoption of AI by extremist groups is unlikely to immediately transform terrorist operations, but it does have important implications for the evolution of terrorism over the medium term. First, AI tools lower the technical barrier for producing sophisticated propaganda, translation, and media content, allowing extremist groups to reach wider audiences across multiple languages with less manpower. Second, AI tools can improve operational tradecraft by helping militants conduct open-source research, generate plans, or automate parts of digital communication networks, increasing the resilience of decentralized cells. Third, the integration of AI into recruitment and propaganda ecosystems may enable what analysts have called “chatbot-driven radicalization,” in which automated systems help sustain ideological engagement with potential recruits over long periods.

#4

Impact of Far-Right Activist’s Death

The killing of Quentin Deranque, a 23-year-old far-right activist in Lyon in February 2026, has become a symbolic rallying point for far-right movements across Europe. Deranque died after being beaten during clashes involving alleged far-left militants connected to an antifascist group. His death triggered demonstrations and memorial rallies organized by nationalist and identitarian groups in multiple European cities, including Lyon, Rome, and Vienna. Investigators arrested several suspects, some reportedly linked to radical left networks and individuals associated with French left-wing political circles. Far-right organizations across Europe used Deranque’s death as a mobilizing symbol, portraying it as evidence of rising violence from radical left movements. The political significance of this event lies less in the incident itself and more in how it is being used as a symbolic narrative across Europe’s ideological divide. Over the medium term, several political dynamics are likely to follow. The incident will probably strengthen transnational networking among far-right movements. European nationalist parties and activist networks increasingly cooperate across borders, sharing messaging, mobilization tactics, and political framing. The coordinated demonstrations following Deranque’s death illustrate how local political violence can rapidly become a continental rallying cause for ideological movements. This dynamic mirrors how previous political incidents in Europe have been used to build a broader narrative about cultural conflict and political legitimacy.

#5

iPhone Exploitation Toolkit

Security researchers at Google have identified a highly sophisticated iPhone exploitation toolkit known as “Coruna.”. The toolkit contains multiple exploit chains capable of bypassing iOS security protections and silently installing malware on a device simply by visiting a malicious website. Coruna relies on at least twenty-three vulnerabilities within Apple’s iOS system, particularly within the WebKit browser framework, and can fully compromise a device without requiring any user interaction beyond visiting the infected page. Researchers believe the toolkit required significant resources to develop and was likely created by a state-level actor or a contractor working on government cyber capabilities. Evidence suggests that components of the toolkit were initially used in surveillance operations, later appeared in an espionage campaign targeting Ukrainian websites attributed to a Russian intelligence-linked group, and eventually surfaced in cybercriminal operations targeting Chinese-language cryptocurrency and gambling sites. In those criminal campaigns, the malware was used to steal cryptocurrency, photos, and email data from infected phones. Security researchers estimate that at least tens of thousands of devices may have been compromised through these campaigns before Apple patched the vulnerabilities in later versions of iOS. For corporate security, the most important takeaway is the demonstration of how advanced offensive cyber capabilities can proliferate beyond their original creators and move into broader criminal and espionage ecosystems. The Coruna case illustrates that sophisticated tools developed for intelligence operations can eventually leak, be resold, or be repurposed by other actors, including cybercriminal organizations. This mirrors earlier cases such as the leak of the NSA’s EternalBlue exploit, which later powered major global cyberattacks.

#6

Economic Costs of Ukraine War on Russia

According to Germany’s Federal Intelligence Service (BND), Russian authorities are likely underreporting the true economic costs of the war in Ukraine. German intelligence estimates that Russia’s federal budget deficit in 2025 was about 8.01 trillion rubles, significantly higher than the officially reported 5.65 trillion rubles. The difference of roughly 2.36 trillion rubles (about $30 billion) suggests that Moscow may be masking the scale of wartime spending and fiscal strain. The BND attributes the growing fiscal pressure to two major factors. First, declining oil and gas revenues, partly due to global price fluctuations and Western sanctions, have reduced one of the Russian government’s main sources of income. Second, the continued costs of the war, including military spending and state support for the defense sector, are placing increasing pressure on government finances. German intelligence also notes that the broader consolidated budget deficit, including regional governments, reached roughly 8.3 trillion rubles in 2025, or about 3.9% of GDP, representing a sharp deterioration compared with the previous year. Despite these indicators, the Kremlin has continued to portray the economy as stable and resilient.

What this could mean for regional economics. The significance of these findings lies in what they suggest about the longer-term sustainability of Russia’s wartime economic model and its effects on regional economic dynamics. If Russia’s fiscal position is weaker than officially reported, it implies that the country may face growing pressure to redirect economic resources toward military spending at the expense of civilian sectors. In addtion, sustained fiscal pressure could accelerate structural economic decoupling between Russia and Europe. Since the invasion of Ukraine, Europe has sharply reduced reliance on Russian energy, while Russia has attempted to redirect exports toward Asia and other markets. If war-related spending continues to grow while revenues fall, Moscow may need to deepen these alternative trade relationships, further reshaping regional trade flows across Eurasia. Finally, prolonged deficits could create financial volatility in the broader regional economy. Russia remains a major exporter of commodities, including oil, gas, grain, and metals.

#7

U.S. Defense Industrial Base Issues

Recent reporting indicates that the U.S. government is convening senior executives from major defense contractors at the White House to address concerns about the rapid depletion of U.S. weapons stockpiles following strikes on Iran and other ongoing conflicts. Companies such as Lockheed Martin, RTX (Raytheon), and other key suppliers have been invited to discuss how to accelerate weapons production and replenish munitions inventories. The urgency stems from the heavy use of precision weapons, missiles, and ammunition in recent operations, as well as earlier transfers of weapons to Ukraine and the ongoing conflict in Gaza. The Pentagon is reportedly preparing a supplemental defense budget request of roughly $50 billion to replace weapons used in these conflicts and expand production capacity. The meeting is expected to focus on increasing output of key munitions such as cruise missiles and other precision strike systems. Also, the administration has been pressuring defense contractors to prioritize production and contract performance rather than shareholder returns, even warning that companies judged to be underperforming could face corrective mandates or contract termination.  The situation highlights a growing shift in U.S. policy toward expanding industrial capacity for military production. Over the past three decades, the American defense sector optimized for efficiency and limited production runs rather than sustained high-volume manufacturing. Large-scale operations and prolonged conflicts are now revealing the limitations of that model. If stockpiles continue to be depleted faster than they can be replenished, the U.S. government will likely push for a significant expansion of manufacturing capacity for missiles, munitions, and related defense technologies. This could lead to a broader reindustrialization push within sectors tied to aerospace, advanced materials, electronics, and precision manufacturing. Missile systems such as Tomahawk cruise missiles, air defense interceptors, and other precision weapons require highly specialized supply chains that include semiconductors, rare earth materials, and advanced composites. Increasing production therefore requires expansion not only among prime contractors but also across a large network of subcontractors and component manufacturers.

#8

CSIS Report on Chinese Military Purge

The new CSIS report examines an unprecedented wave of purges within China’s People’s Liberation Army (PLA) under Xi Jinping. Since roughly 2022, Chinese authorities have removed or investigated a large number of senior officers across the military hierarchy, including members of the Central Military Commission (CMC), senior theater commanders, leaders of the Rocket Force, and officials in the defense procurement system. In total, more than one hundred senior officers may have been removed or implicated in the campaign. The purge has been particularly significant at the highest levels of military leadership. The CMC (the body that directly commands the PLA) has effectively been reshaped, with most of the generals appointed in 2022 no longer in their positions. Of the six top generals appointed to the CMC at that time, only one reportedly remains, and he is a political commissar focused on discipline rather than operational command. The most immediate geopolitical implication of these purges is that China’s military leadership is undergoing a period of significant institutional disruption. The removal of large numbers of senior officers creates a temporary leadership vacuum and forces rapid promotion of new commanders who may have less experience at the strategic level. In the short term, this could reduce organizational cohesion, slow decision-making, and complicate operational planning within the PLA. This matters for regional security because China is simultaneously expanding military activity around Taiwan and across the Indo-Pacific. In addition, the purge reflects Xi Jinping’s effort to consolidate personal control over the military. The PLA is not a national military in the Western sense but the armed wing of the Chinese Communist Party. Ensuring absolute political loyalty has long been a core principle of Chinese civil–military relations.

#9

Canada and India Work Toward Rebuilding Ties

India and Canada have announced a series of agreements aimed at restoring and expanding bilateral relations after a period of diplomatic tension. The centerpiece of the announcement is a long-term nuclear energy partnership that includes Canadian uranium supplies to support India’s nuclear power sector. The agreement is part of a broader set of initiatives covering critical minerals, technology cooperation, space, defense, and education. Both governments also indicated they intend to finalize a long-negotiated free trade agreement by the end of 2026. The rapprochement follows a period of strained relations after Canada previously accused India of involvement in the 2023 killing of Sikh separatist Hardeep Singh Nijjar on Canadian soil. The new Canadian government under Prime Minister Mark Carney is seeking to stabilize relations with New Delhi and re-engage economically and strategically. At the same time, both countries have expressed interest in diversifying trade relationships and reducing exposure to economic pressure from larger powers.  The renewed partnership reflects the growing strategic importance of India in global energy and technology supply chains. India is rapidly expanding its nuclear energy capacity as part of a strategy to meet rising electricity demand while reducing carbon emissions and dependence on fossil fuels. Canadian uranium supplies and nuclear cooperation strengthen India’s ability to scale its civilian nuclear program, reinforcing its position as a major emerging energy and industrial power. In addition, the agreement reinforces a wider pattern of geopolitical alignment among democratic and middle-power states seeking to diversify economic partnerships. Canada’s willingness to move past recent diplomatic tensions with India reflects recognition that India is an increasingly important partner in areas such as critical minerals, technology, and energy security. These sectors are central to global competition over advanced manufacturing and clean energy supply chains.