The West’s response to military warfare may be increasingly economic
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At the White House, Washington, U.S.A. on February 21st, 2022, Joe Biden signed an executive order prohibiting trade and investment between the United States and two regions in eastern Ukraine that have been recognized by Russia as separate.
White House| Reuters
The introduction of thermonuclear weaponry in the mid-20th century has brought about worries that the planet might be at the brink of World War III.
A new threat is now emerging worldwide: Economic warfare.
Armamentally armed conflict is still threatening global stability as was demonstrated by the Russian invasion and occupation of Ukraine. It is possible that kinetic warfare will be more economically countered.
Russia is being sanctioned by the West, and other countries that are militarily inclined could face similar sanctions.
China is watching the West’s reaction to Russia’s attempt at annexation closely. China may move one day on Taiwan creating a multifrontal military challenge for the U.S. and U.K. as well as India, South Korea, Japan, South Korea, Australia, EU, India, Japan and South Korea.
It is almost impossible to imagine that allies would try to fight Russia or China in Kyiv or Taipei. Multiple nuclear superpowers might be temped at any moment to do the unthinkable.
In this context, it would make more sense to use broad-based and severe economic sanctions against Russia and China that are imposed on the West democratic and capitalist world.
Some old iniquity has surfaced
This scenario was impossible before the fall and opening of China in the late 20th century. However, it seems now that such old enemies and enmities may have risen to the surface.
Just as the global economy is deglobalizing, this geopolitical divide has returned. Globalization used to be considered a stabilizing factor that could harmonize the international economic interests and reduce the risk of global war.
Unfortunately, the ghosts of an era gone by have returned, suggesting that it is time to “the end of history” Was a concept without any basis in reality.
The pandemic also revealed the inequal tradeoff between supply chains security and efficiency.
A scenario where economic warfare seems more possible in this current environment is as each nation seeks to restore critical infrastructure, but also key domestic industry sectors.
The global economic impact
It has implications for global economic and financial markets.
After the invasion of Ukraine, global markets are reeling.
The Russian stock market — already down sharply since October’s peak, even amid surging oil prices, on which it depends — tumbled more than 30% this week.
But that’s not before all the Western sanctions have been enforced.
If Beijing moves on Taiwan, it’s easy to imagine a similar set of punitive sanctions targeting Beijing. It could target the Chinese Communist Party’s elite as well the country’s wealthy generals and billionaires. China would also be cut off from the West markets, which are crucial for its continued slowing economic growth.
Even if it does, the risk of kinetic warfare will still be present.
Global economic warfare can disrupt growth and stability. Cyberattacks could also be used to cripple critical systems. It includes basic financial transfers as well as the most difficult critical infrastructures, such water purification or global electrification.
The U.S. has no greater preparedness for such a response than Russia or China.
Although it might not be the war that our generation has always been afraid of, it could be the next war with severe and long-lasting consequences.
— Ron Insana is a CNBC contributor and a senior advisor at Schroders.
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