Trade, sanctions, gas, people: the weapons of choice in our new world war of economics and alliances

I am a sixties child and have never been in the thick of any armed conflict. My parents were born in the 1930s and were caught up in World War II as children, being evacuated from suburban London as the German V-1 flying bomb menaced them from overhead. My grandparents were caught up in both world wars, having been born just before the first one kicked off, with my grandfather shooting German bomber aircraft out of the sky in the second one.

As a young clerical assistant in the City of London, I followed the Falklands war through newspaper and TV reports. And stuck at home during a bout of glandular fever, I watched the Gulf War on TV a decade later, but that was as near as I got.

After the two "big ones" of the last century, the world has managed to avoid armed conflicts on anything near their scale. There have certainly been localised wars around the planet, and the Korean and Vietnam wars took place in the context of the Cold War's global power struggle. But close as we may have come at times, World War III never happened.

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Yet in the absence of "hot" conflicts between countries, perhaps we've just found new ways to attack each other, with the aim being the same as always: to exert influence and pressure on other nations. If we broaden the definition of war to include 21st century methods, who is at war with whom in 2022?

China is fighting wars on several fronts as it fends off international criticism over its internal policies and attempts to undermine its rise to superpower status.

Being the world's largest trading nation and most populous country, the most powerful weapon in China's arsenal is the ability to inflict economic damage. One example of this weaponisation of trade is Australia, which has been deprived of a large degree of its economic independence because of how dependent its economy has become on China.

China, through its domestic companies, has acquired substantial Australian assets such as key ports like Darwin, mines, farmland, dairy processors, real estate, schools, water and energy, whilst flooding the country with cheap manufactured consumer goods and essential chemicals. When the Australians became critical of Beijing's handling of the Covid-19 crisis, it turned off the supply of money and chemicals, choking the country's economy. China has also come close to bringing Australia's logistics and trucking industry to a standstill, and could even cause its wine production to halt this year.

Lithuania found itself in China's crosshairs when it allowed Taiwan to open a representative office in the self-ruled island's own name. This directly led to trade problems for Lithuanian companies, whose exports have been disallowed at China's border. To amplify the pain, multinational companies have been told that if they continue to do business with Lithuania, they may find themselves cut out of China.

With the Covid-19 pandemic, China also gained the ability to control other countries' access to personal protective equipment (PPE). So-called "wolf-warrior" diplomats overseas have aggressively targeted governments and companies that criticised China, threatening to cut off aid, access to vaccines and PPE. As anyone who has been picking up boxes of lateral flow tests in the UK will have noticed, until September 2021, they were all "Made in China".

The US also weaponises trade. An example close to home is how President Donald Trump in July 2020 signed an executive order to remove Hong Kong's special trading status with the US on the basis of a 1992 act which stipulated that Hong Kong had to remain autonomous to retain its status. Beijing has increased its influence on our city over the years, and US politicians pounced on the chance to make their displeasure known. Yet trade is a lesser weapon in the US armoury than a weaponised US dollar.

The US controls access to the US dollar and the payment systems through which the currency flows. Without access to global dollar trading, any country would find it difficult to pay for most commodities, international trade would get very difficult, and it would find itself thrown back into the dark ages.

America exerts control over its currency through the dollar payment system and its interconnection with the Belgium-based Society for Worldwide Interbank Financial Telecommunication (SWIFT), which in 2018 carried almost half of all large cross-border transactions. Even individual financial institutions can be targeted. For example, when HSBC has found itself in hot water with US regulators over the years, the threat of being cut off from SWIFT was always looming in the background. The same approach is at play in Hong Kong, and is the reason Chief Executive Carrie Lam and other sanctioned individuals do not have Hong Kong-based bank accounts and functioning credit cards.

This financial nuke was used on Iran in 2012 when the US Senate Banking Committee unanimously approved pressuring SWIFT to terminate business arrangements with certain Iranian banks as part of the sanctions imposed on the country to halt its development of nuclear weapons.

In the current face-off between Presidents Joe Biden and Vladimir Putin over a potential Russian invasion of Ukraine, Biden has warned of sanctions that would inflict severe pain on the Russian economy. He could indeed do this by rallying and pressuring allies to start isolating Russia from global financial markets. However, Russia has a powerful weapon with which to retaliate.

The European Union's member states rely on Russia for around 35 per cent of their natural gas, which flows through pipelines crossing Belarus, Poland and Ukraine to Germany, which has become a natural gas hub on the continent.

On the other side, the European gas supply is interconnected with other suppliers, such as Norway. Any disruption, which could reverse the direction of the gas flow from West to East, has devastating effects on prices across all of Europe, including the UK. Heating homes throughout the winter could become prohibitively expensive if Europe falls out with Russia over politics. As the US comes charging in to add to pressure over the Ukraine conflict, the supply of gas too becomes weaponised.

The rules-obsessed EU has its own arsenal of weapons with which it can inflict pain on its own member states, mostly through trade and rules governing the shape of cucumbers and the definition of a sausage. But it is also running into something far more sinister: the weaponisation of people.

Turkey has been able to successfully pressure the EU and weaponise the flow of "millions" of migrants and refugees heading to Europe from the Middle East and Africa. The escalation of the conflicts in Syria and Afghanistan, and resulting refugee flows, led to a 2016 agreement which saw the EU give Turkey €6 billion (US$6.8 billion) to keep people out. The knock-on effect has travelled across Europe to the French coast, where Britain is accusing France of being uncooperative in keeping refugees from reaching a post-Brexit UK.

Given the frosty relations between the UK and Europe, particularly France, this is probably no surprise. And for their part, the French are particularly sore about losing a US$90 billion submarine deal with Australia, the retreat from which Paris sees as a "stab in the back" from the Aussies, Americans and Brits. Yet it actually resulted from China's actions in the South China Sea making the Australians uncomfortable.

We read about modern warfare and the way that wars supposedly will be fought in the future, the vast amounts of money spent on "defence", and live in fear of the next great war breaking out.

Here, I have simply pulled together a few examples of where global interdependencies have now come back to bite us and although it may not be "war" by its strict definition (i.e. protracted armed conflict between two countries) the superpowers, in particular, can painfully exert their will and influence in these new ways.

So it's just war, by other means? If that's too strong a term for it, I think it's fair to say the world is at least not fully at peace. How nations fight back against this will evolve over time, but perhaps it signals the end of globalisation and the return of localisation - coupled with the end of interdependencies and a long-term return of independence.

This article originally appeared on the South China Morning Post (SCMP).

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