December 2016/January 2017

Your questions answered

What is Geoeconomics?
The term geoeconomics has
become popular but it lacks an
agreed definition. Most
commonly, it is understood as
the use of economic tools to
advance geopolitical
objectives. Other definitions
reverse the ends and means,
emphasizing how flexing
geopolitical muscle is used for
economic results. Broadly,
one can think of
geoeconomics as the interplay
of international economics,
geopolitics and strategy.
Geoeconomics entered the
lexicon in 1990 with an article
by Edward Luttwak, which
argued that following the Cold
War, the importance of
military power was giving way
to geoeconomic power.
One reason the term is more
commonly used now is the rise
of China, which is increasingly
using economic tools to
project power. Two other
factors are also relevant: the
revival of state capitalism and
state-owned enterprises
means that states have more
economic resources at their
disposal; and the deep
integration of global trade
links and financial markets has
made geoeconomic tools more
powerful.
In War by Other Means,
Robert Blackwill and Jennifer
Harris explore today’s leading
geoeconomic instruments:
trade policy, investment
policy, economic and financial
sanctions, financial and
monetary policy, energy and
commodities, aid and cyber.
While some function as they
have in the past (aid), others
are new (cyber) or operate in a
different environment
(energy).
China is arguably the
world’s most prominent
practitioner of geoeconomics,
but Russia and the US are also
major players. Beijing has
repeatedly cut car imports
from Japan or withheld
exports of Chinese rare earths
to Japan in efforts to weaken
Tokyo’s resolve over territory
and sovereignty in the East
China Sea. In providing aid to
Africa, China rewards those
countries that vote with it at
the United Nations.
Russia uses its energy
endowment to advance
strategic objectives. In 2008,
it shut off gas pipelines to
parts of Europe in the middle
of winter amid political
disputes. The Kremlin offers
huge financial support to
annexed Crimea.
In response to the Russian
annexation of Crimea, the US
and others did not send troops
to defend Ukrainian territory,
but instead introduced
sanctions on Russia. The US
has also led international
efforts to influence Iran’s
nuclear policies through
sanctions. The preponderance
of the dollar and US
dominance of the
international financial system
mean that American sanctions
have a lot of bite.
With Donald Trump in the
White House, it is an open
question whether the US will
employ US geoeconomic tools
to advance the country’s
strategic interests. But one
thing is clear: geoeconomics is
a term we will hear a lot more
in the next years.
Marianne Petsinger,
Geoeconomics Fellow in the US
and Americas Programme at
Chatham House

International events

December
4 December Italy to hold a referendum on constitutional reform
Presidential election in Uzbekistan after death in office of Islam Karimov
Re-run of the second round of the presidential election in Austria

2016 to 5 December 3rd anniversary of the death of Nelson Mandela

January 5-8 December UK Supreme Court hears Government appeal on Brexit ruling

2017 7 December

General election in Ghana
75th National Pearl Harbor Remembrance Day in the US

30 December 10th anniversary of the execution of Saddam Hussein

1 January 2017 António Guterres to take office as Secretary-General of the United Nations

11 January 15th anniversary of the first detainees being transferred to Guantanamo Bay

8 | the world today | december 2016 & january 2017

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