The US, EU, and UK need a shared approach to economic statecraft. Here’s where to start

• Published in: Policy File 2023
• Main Authors: Donovan, Kimberly, Nikoladze, Maia, Goldin, Nicole, Bhusari, Mrugank, Danzman, Sarah Bauerle, Sahu, Ambuj, McDowell, Daniel
• Format: Report
• Language: English
• Subjects: Economic planning; Economic policy; Foreign policy; International cooperation; National security

Economic statecraft, or leveraging economic power to achieve foreign policy and national security objectives, dates back to Greco-Roman times. Modern economic statecraft and its associated tools, including financial sanctions and export controls, as well as positive inducements, were born out of World War I and refined by the Allies during World War II to protect their assets held in Nazi-occupied territory and eventually to bolster European economies that were devastated during the war. Since then, governments and multilateral organizations have expanded their authorities and capabilities to leverage economic statecraft tools to protect their nation’s security, advance foreign policy and economic objectives, and stabilize partners and allies’ governments and economies. Viewed as more than diplomacy, but short of military intervention, economic statecraft has become the West’s tool of first resort to address national security threats and change an adversary’s behavior. Sanctions are used to disrupt terrorist groups, transnational criminal organizations, and illegal traffickers as well as deny regimes access to the international financial system and restrict their ability to move funds. Economic statecraft has gained significant attention over the past year and a half as a result of the Group of Seven (G7) and broader coalition’s economic response to Russia’s invasion of Ukraine. G7 and coalition partners levied significant coordinated sanctions and export controls on Russia to freeze Russian assets, reduce their economic dependency on Russia, and degrade Russia’s ability to import military grade components needed to pursue its war. The economic statecraft landscape is becoming more complex as transatlantic partners increasingly leverage the tools to counter transnational threats. There is a growing need to understand how these tools are used, by whom, and when as well as their intended and real impacts worldwide.