Economic Warfare in the 21st Century

Table of Contents

1. Frontmatter

2. Chapter 1. The Problem, The Need, The Condition

   Greg Kennedy

   Abstract

   As the Russo-Ukrainian war moves into its third year, the role of Economic Warfare becomes increasingly important in the power relationships between states. Donald Trump’s America uses tariff and sanctions policies against friend and potential adversaries alike in pursuit of naked self-interest to make America great again. China likewise uses various methods of economic coercion and statecraft to further its own global influence and power in competition with both the United States and Europe. Europe struggles to overcome the tensions between cooperative policies that can hold the Union together and sovereign economic and fiscal policies around domestic social needs and rising defence and security concerns. In the UK, ongoing debates about how best to use the economic levers of powers to confront the Russian and Chinese coercive military and economic actions, as well as reconcile its closest ally America acting unilaterally in contradistinction to UK national interests demand action. NATO, similarly, finds itself having to rearm and reorient the thinking of its members to the possibility of a long period of armed aggression once more being a reality of the European international situation, without a friendly or helpful America, forcing it to look at the mobilisation of all methods of deterrence and coercion itself, including the use of economic warfare and statecraft as part of its role. These various influences demand that multidisciplinary analysis is applied to investigating the meaning of these evolving global strategic strands.

3. Evaluation of UK Condition

   1. Frontmatter

   2. Chapter 2. Can Britain Weaponise Its Interdependence?

      Astrid Hardy, Greg Kennedy

      Abstract

      Economic coercion provides an alternative or complementary means to manipulate a competitor or adversary, alongside diplomatic and military methods of coercion. It is an essential instrument of power that, when wielded effectively, can materially change the choices of another actor. But it has also become loaded with political and moral judgements in recent political debate in Britain. Britain appears to have forgotten that its extensive economic sanctions regime is exactly the economic coercion it publicly condemns. This research demonstrates this misperception of coercion is counter-intuitive to securing British interests, especially when national resources are stretched and under external pressure. It draws on the relatively new theory of “weaponised interdependence” to examine the international political and economic system and whether this interpretation of economic coercion provides an opportunity for Britain to exert political and economic power. Or, whether it exposes the extent to which Britain is vulnerable to economic coercion. Understanding these conditions is essential for informing relevant, practical national security strategies.

   3. Chapter 3. The UK Current National Security Complex Is Not Able to Wage Effective Economic Warfare

      Francesca Ghiretti

      Abstract

      With a long history of Economic Warfare to draw from, a logical expectation could be that the United Kingdom is a nation steeped in understanding and knowledge regarding the practice of those economic levers. This chapter demonstrates that in fact the United Kingdom is not prepared for the vagaries of modern Economic Warfare and as such risk being both weak offensively in terms of being able to deter or coerce potential adversaries and is vulnerable defensively to the use of those economic levers against its national security interests.

   4. Chapter 4. British Economic Statecraft from the Perspective of Complexity

      Maria de Goeij Reid

      Abstract

      This chapter is about British economic statecraft from the perspective of complexity. The first part of this chapter looks at briefly defining economic statecraft and complexity. These brief definitions include some notes on why economic warfare and economic statecraft should not necessarily be seen as separate topics, and on why the systemic influence approach is beneficial to analysing and building strategies for effective economic statecraft. The second part of this chapter focuses on how this complexity approach to economic statecraft could be done in practice, including a brief note on what success looks like in economic statecraft. This part is split into methodologies, opportunities, and challenges for negative economic statecraft and for positive economic statecraft.

4. Evaluation of NATO Condition

   1. Frontmatter

   2. Chapter 5. The Forgotten Arsenal: Advocating for NATO’s Strategic Use of Economic Warfare

      Paul Larcey

      Abstract

      As NATO commemorated its 75th anniversary, it can reflect on its historic achievements in halting Soviet expansion post-WWII and its pivotal role in the Soviet Union’s collapse in 1991. Following two decades of relative peace and decreased defence spending, the resurgence of Great Power Rivalry and the rise of geoeconomics have exposed an emerging coalition that threatens NATO and its allies. The alliance must bolster its military readiness and consider economic warfare, as adversaries increasingly deploy these tactics against NATO countries.

      The advent of new technologies such as AI and quantum computing presents opportunities and challenges for the USA and defence-industrial complex, necessitating increased funding and innovative thinking. To address the evolving and complex threats of the future, NATO must adopt comprehensive defensive and offensive strategies that integrate military force with advanced approaches in the manufacturing, economic, and financial sectors.

      In our interconnected world, warfare has evolved beyond traditional military confrontations. The contemporary geopolitical landscape demands innovative strategies to counteract and preempt actions threatening the stability and security of NATO member states and the ever-present systemi risks associated with interconnection. Economic warfare is a potent tool that NATO can utilise to achieve its strategic objectives and maintain a competitive edge.

      This chapter examines the rationale for NATO’s engagement in economic warfare, focusing on key adversaries such as China and Russia and other Western rivals. It analyses the potential benefits, systemic risks, inherent challenges, and the framework necessary for effective implementation. By exploring historical precedents and current dynamics, this chapter explores how NATO can leverage economic warfare to secure its strategic interests.

   3. Chapter 6. Athena’s Shield Is Brittle: Why and How NATO Needs to Get Serious About Economic Warfare

      Heiko Borchert

      Abstract

      Economic warfare is about synchronizing public-private efforts to combine economic intruments and military capabilities to shape the performance of the defense ecosystem to deliver military power. Economic warfare is integral to NATO’s core mission, but has been neglected for too long. Therefore, this chapter presents three design principles for NATO to think about and six baseline requirements for NATO to preapre for economic warfare.

5. Evaluation of European Union Condition

   1. Frontmatter

   2. Chapter 7. Can/Should EU Do Economic Warfare?

      Anna Hillingdon

      Abstract

      Economic warfare involves trade restrictions such as embargoes, boycotts, and discriminatory tariffs, and often includes sanctions as part of a broader set of measures. A belligerent nation may employ economic warfare to weaken another state's economy, thereby reducing its political and military power. Sender countries often impose secondary sanctions that prohibit others from trading with the targeted state. However, the effects of economic warfare are not one-sided—it can be self-damaging, create opportunities for non-compliant or neutral countries, and sometimes even benefit the intended target.

   3. Chapter 8. The Two Faces of Coercion: Comparing China and Russia’s Economic Coercive Practices and Approaches in Europe

      Maria Papageorgiou

      Abstract

      This chapter intends to offer a comparative analysis of the economic coercion tools and approaches China and Russia have used to secure their foreign policy objectives. Both have targeted European states; however, despite having similar motivations, their implementation approaches differ significantly, with China seeking to change the course of a state’s actions and Russia to reassert its role as a great power. Similarly, the methods differ, with China using a variety of tools and extending to more areas, yet of no strategic importance, taking advantage of its market power, while Russia relying on its comparative advantage in strategic sectors, mainly energy as the primary means of coercion. Finally, their track record of success in Europe is rather mixed for both.

   4. Chapter 9. The Effectiveness of Swiss Sanctions Against Russia in the Context of the Current Conflict in Ukraine

      Fabian Teichmann

      Abstract

      The dawn of the twenty-first century heralds a period of unprecedented complexity in the global arena. Within this context, the European Union (EU) faces persistent scrutiny regarding its capacity to deploy economic sanctions effectively—a critical facet of modern economic warfare. This paper delves into the intricate dynamics of economic sanctions through the lens of a non-EU member, Switzerland, whose recent actions against Russia provide a poignant case study of the challenges inherent in aligning with EU sanction policies.

      The effectiveness of sanctions as tools of economic warfare is predicated not only on the economic might of the imposing entity but also on the coherence of international support and the robustness of enforcement mechanisms. Switzerland's pivotal role, highlighted by its strategic deviation from a longstanding tradition of neutrality, underscores a critical realignment toward cooperative internationalism in sanction enforcement. This shift invites an analysis of the underlying structural and diplomatic intricacies that both empower and hinder the EU’s sanctioning capabilities.

      In exploring Switzerland’s sanction regime against Russia, this paper seeks to illuminate the broader implications for the EU’s strategic posture in economic warfare. The case study highlights significant challenges, including the intricacies of international legal alignment, the resilience of targeted economies and the geopolitical contingencies that shape sanction outcomes. By examining these elements through the Swiss experience, the paper aims to contribute to the ongoing discourse on the EU's ability to wield economic sanctions as effective instruments of twenty-first-century warfare.

      This investigation is particularly salient given the evolving landscape of global power dynamics in which economic measures increasingly serve as proxies for military action. Through a detailed analysis of the Swiss approach, this paper will offer insights into the potential trajectories for EU policy. Pathways for enhancing the efficacy of economic sanctions and, by extension, fortifying the EU's stance within the complex theater of international relations will be suggested.