Risks of a NATO-Russia clash

Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up here.Two new developments underline the [View in browser]( [Bloomberg]( Welcome to Balance of Power, bringing you the latest in global politics. If you haven’t yet, sign up [here](. Two new developments underline the challenge facing Kyiv’s NATO allies and the [growing risks]( of a direct confrontation with Moscow as Russia’s war on Ukraine approaches a third winter. Iran sent ballistic missiles to Russia, [sources told Bloomberg]( at a time when the Kremlin is waging [an intense bombing campaign]( aimed at wrecking Ukraine’s energy infrastructure and [freezing its people]( into submission. CIA chief William Burns said shipping such firepower to Russia would be a “[dramatic escalation]( of Iranian support, which has so far included supplying hundreds of combat drones. Tehran has insisted [it isn’t arming]( either side. Iranian-made Shahed-136 drone. Source: Middle East Images/AFP/Getty Images At the same time, two NATO states reported [weekend incidents]( with Russian UAVs. Romania said fighter jets tracked a Russian drone that violated its airspace before heading into Ukraine. Latvia summoned a Russian diplomat after a UAV crashed in the Baltic state’s east. President Edgars Rinkevics said NATO must act “collectively” against a growing number of such incidents. The new Ukrainian foreign minister, Andrii Sybiha, urged the military alliance to deploy its air defenses “to intercept Russian missiles and drones over Ukraine.” NATO has resisted any such direct conflict with Russia, wary of an escalation that could turn nuclear. Delivery of substantial numbers of Iranian ballistic missiles would let Russia ramp up attacks on Ukrainian cities. That challenges Kyiv’s allies to [strengthen air defenses]( a task they’ve been slow to achieve so far. And if Russian drones keep crossing into NATO airspace, the alliance must show it can protect itself robustly. NATO isn’t likely to throw a protective shield over Ukrainian airspace. Kyiv’s backers also remain divided over letting it use donated long-range weapons to strike military airfields and launchpads inside Russia. A sustained Russian blitz of Ukrainian cities and more drone incidents over NATO territory may start tilting those debates in Kyiv’s favor. — [Anthony Halpin]( Damaged residential buildings following a missile attack in Lviv, Ukraine, on Sept. 4. Photographer: Yuriy Dyachyshyn/AFP/Getty Images Global Must Reads Mario Draghi told the European Union it needs to invest as much as €800 billion ($884 billion) extra a year to help it compete with China and the US and recommended the regular issuance of common bonds. In [a long-awaited report]( the former European Central Bank president urged the EU to develop its advanced technologies, create a plan to meet its climate targets and boost defense and security of critical raw materials, labeling the task “an existential challenge.” Venezuelan opposition candidate Edmundo González, considered by the European Union and others to have won July’s presidential election, fled to Spain at the weekend to [escape a widening crackdown]( by Nicolás Maduro. The authoritarian incumbent is clinging to power at all costs, yet his chosen path of diplomatic and economic isolation means that the international support he needs to spur Venezuela’s economic recovery — and potentially legitimize his presidency in the eyes of citizens — is likely to remain out of reach. Opposition candidate Edmundo González. Photographer: Gaby Oraa/Bloomberg Keir Starmer’s plans to remove a £300 ($393) winter fuel payment made to many elderly Britons is generating plenty of negative headlines and [faces mounting unrest]( from his own Labour lawmakers in a parliamentary vote due tomorrow. The prime minister, while insisting the cuts are necessary to help plug a £22 billion budget shortfall left by the previous government, is banking that increases in the state pension to which his government has committed will outstrip the loss. There was little doubt that Algerian President Abdelmadjid Tebboune would win a second term in an election critics said was held earlier than expected to [sideline serious challengers](. The 78-year-old leader, who’s seen as close to the military, secured 94.7% of ballots in the Sept. 7 contest. His oil and gas-rich North African country has wielded growing international clout in recent years after the Russian invasion of Ukraine made it a key alternative supplier for Europe. With a poll showing Donald Trump slightly leading Kamala Harris and voters saying they need to know more about her, the US vice president will travel to tight battleground states after [the debate tomorrow]( between the rival candidates. While within the margin of error, Trump’s 48%-to-47% lead in a New York Times-Siena College poll [published yesterday]( suggests Harris’ month-long rise in surveys may have stalled and the former president’s support remains resilient ahead of the November election. Trump pledged to make it too costly for countries to shift away from using the US dollar. The statement follows months of discussions with his economic advisers on ways to [penalize allies or adversaries]( who seek active ways to engage in bilateral trade in currencies other than the American greenback. Mexico’s opposition is pledging to block President Andres Manuel Lopez Obrador’s [controversial overhaul of the judicial system]( in the Senate, where the ruling coalition is close to securing a two-thirds majority needed to change the Constitution. Japan’s ruling party leadership election will have at least one woman in the field after Sanae Takaichi, a protege of late Prime Minister Shinzo Abe, [entered the race]( today, the seventh Liberal Democratic Party lawmaker to declare they’re running in the Sept. 27 ballot that will result in a new premier. The EU is working on a proposal to censure Slovakia over the erosion of democratic norms, a move that could result in the bloc [withholding funds]( earmarked for a nation where about 80% of all public investments are financed by European money. Washington Dispatch With the summer recess over, US House and Senate lawmakers [face a deadline]( at the end of the month to avert another government shutdown. As both Republicans and Democrats maneuver for advantage, it’s not clear how an agreement on a funding measure might emerge and how long it would last. House Speaker Mike Johnson told rank-and-file Republicans that he was looking to hold a vote as soon as this week on temporary funding legislation that would keep government agencies open until March. But Democrats in both chambers say they want to extend funding only till December — after the election and before the next Congress. In any case, a deal on some sort of temporary funding extension by Oct. 1 is necessary to prevent a potential shutdown of some federal agencies and services, since there isn’t enough time for both chambers to complete all 13 government spending bills by the end of September. One thing to watch today: Under new guidelines, the White House is [taking steps to ensure]( that Americans have the same access to benefits for mental health and substance use that they do for physical health. [Sign up for the Washington Edition newsletter]( for more from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television. Chart of the Day Israel’s finance ministry [slashed its growth projection]( for this year, underlining the strain that the almost year-long war in Gaza has put on the country’s economy. Gross domestic product will expand by 1.1%, lower than a previous prediction of 1.9%. The projection for 2025 was trimmed to 4.4% from 4.6%. The new forecast means Israel’s economy is set to grow at the slowest pace this year since around 2009, with the exception of the Covid-19 pandemic in 2020. And Finally Super Typhoon Yagi has left more than 60 people dead or missing across northern Vietnam and southern China, wreaking havoc on agriculture and damaging energy infrastructure. Yagi was [the strongest autumn typhoon]( to strike China since 1949, according to a Xinhua News Agency report citing the China Meteorological Administration. It’s the 11th of the season so far. Damaged buildings and debris yesterday after Super Typhoon Yagi hit Ha Long in Vietnam’s Quang Ninh province. Photographer: Nhac Nguyen/AFP/Getty Images More from Bloomberg - Check out our [Bloomberg Investigates]( film series about untold stories and unraveled mysteries - [Bloomberg Opinion]( for a roundup of our most vital opinions on business, politics, economics, tech and more - [Next Africa]( a twice-weekly newsletter on where the continent stands now — and where it’s headed - [Economics Daily]( for what the changing landscape means for policy makers, investors and you - [Green Daily]( for the latest in climate news, zero-emission tech and green finance - Explore more newsletters at [Bloomberg.com](. Follow Us Stay updated by saving our new email address Our email address is changing, which means you’ll be receiving this newsletter from noreply@news.bloomberg.com. 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