The Age of Geoeconomics

In the era of wars waged by the use of economic sanctions, competing trade regimes, exchange rates and the manipulation of the prices of raw materials and currencies, the World Economic Forum listed seven challenges that are connected to the appropriate development of geoeconomic strategies. Globalization enabled great powers to devise a strategy for the whole world without giving up their regional hegemon status. In recent years, the countries wielding less power have also been concentrating around regional hegemons. However, excessive interde- pendence may just as much be the force maintaining the fragile security as the catalyst for war: close relationships, especially when unbalanced, may easily sour. 

Geopolitics and Globalization

Geopolitical competition transforms the global economy, the global balance of power and governance. Before the nancialeconomic crisis, geopolitics mostly played a role at the local level, however, nowadays the conflicts between great powers have ared up again. The most important are the tensions between the West and Russia, and China and its neighbors, as well as the increasingly multifaceted crisis in the Middle East. 

Although many wars are being waged all over the world from Damascus to Ukraine, today’s main ba leground is the economy. Military action is replaced by economic sanctions, and military alliances are replaced by competing trade frameworks. The likelihood of a currency war is far greater today than that of annexation, and manipulating the prices of certain raw materials (such as oil) is a far more powerful weapon than the conventional arms race. This shows that we are witnessing the rise of geoeconomics, a competition in the language of trade but with the logic of war.

Geo-economics is simultaneously the antithesis and the greatest triumph of globalization. The mutual dependency and linkage between countries becomes so strong that exclusion from this system is considered as great a tragedy as war.

The WEF’s study reveals the geo-economic challenges, and pinpoints the strong trends that will reshape the world and change the conditions of the competition between the countries. These paint a picture of the world where the possession of power will be just as important as chasing pro ts, and this will be coupled with the increasing economic engagement of the state; economic warfare will undermine economic integration; multilateral systems will regress to the regional level instead of becoming global; oil prices will be low and ckle, therefore countries will compete for markets rather than resources.

The countries and alliances that are able to shape the future to their own liking (China, US, EU) are projected to benefit from these developments, while the greatest losers will be the international organizations that can expect neither support from great powers nor the autonomy that enabled them to mediate between these powers. In the absence of global leader- ship or coordination, global norms and standards are eroding, and new multipolar power dynamics characterized by the dominance of regional powers are forming. 

SEVEN CHALLANGES BASED ON THE WEF STUDY: 

• Economic warfare
• The “geopoliticization” of trade talks
• State capitalism 2.0
• Competition for closed markets (and not resources)
• The survival of the biggest and the hollowing out of the periphery
• China’s infrastructure-driven web of alliances
• Declining oil prices 

Economic Warfare

Developed countries are ever less willing to pursue their foreign policy objectives through the use of military force, and they use their global economic in uence for extending their power to compensate for this. The recent Western sanctions against Russia are the manifestations of the rst greatpower conflict since the Cold War. Economic sanctions are the main tools of geo-economics, and they may vary widely from a stricter health regulation for imports to a full-blown economic blockade. Sanctions are usually double-edged swords, since they also hurt the interest of the country introducing them, and they may also provoke countermeasures.

The rami cations of this trend are not clear yet, but one of its consequences may be the deglobalization of global corporations. This means that multinational enterprises have to return to their national roots and start thinking in an ever closer relationship with their own country, taking their decisions together in line with the country’s foreign policy stance. Another potential consequence may be the transformation of international trade pa erns, along the new lines of geopolitics.

However, the outcome of these geoeconomic “o ensives” is not a zero- sum game. A stronger economy with a deeper toolkit and more opportunities can wreak much more havoc in the target country than it can expect in return. Nevertheless, sanctions may fail, and often a “rejoicing third” will profit from the whole process. Irrespective of whether they are successful or not, sanctions exert a huge economic impact on the given economy in any event: technological progress declines and the population’s standard of living diminishes, which ultimately leads to instability and may even topple the established regime. The other losers of the process may be the Western-based multinational corporations that might lose substantial markets. If they are able to maintain their economic in uence, the US and the EU will emerge as the relative winners, with China as the “rejoicing third”. In addition to the sanctioned countries and Western multinationals, international trade organizations are also expected to emerge from the process as losers, since they have lile say in the developments, which casts doubt on their credibility.