Welcome to the age of weaponized interdependence

In 2019, two political scientists, Henry Farrell and Abraham Newman, published one of the most well-timed papers in recent memory. Titled Weaponized Interdependence: How Global Economic Networks Shape State Coercion, it argued that globalization today runs on networks, both physical and digital, that underpin everything from trade to finance.

There is a common trope in the literature on globalization that suggests that greater economic exchange has fragmented and decentralized power relations. We, in contrast, argue that these economic interactions generate new structural conditions of power. Complex interdependence, like many other complex systems, may generate enduring power asymmetries.

This observation allows us to bring the literature on security, which has paid deep and sustained attention to the systemic and structural aspects of power, into direct debate with the literature on global markets, which has largely neglected it.110 Theoretically, our account shows how the topography of networks shapes power relations, generating systematic differences in the ability of some states—and not others—to gather information and deny access to adversaries. Empirically, we demonstrate how decentralized patterns of economic exchange have led to centralized global networks such as SWIFT and the internet. As we discuss further in unpublished research, similar patterns prevail in other global networks such as the dollar clearing system and some globalized supply chains. Bringing these findings together, our article provides a historically detailed account of (1) how the new network structures that shape power and statecraft have come into being and (2) how these structures have been used to weaponize interdependence by privileged actors (who possess both leverage over network hubs and the appropriate domestic institutions that allow them to exercise this leverage).

These networks are never flat or evenly distributed. Thanks to classic network effects, they tend to cluster around a few key nodes. A disproportionate share of global traffic, whether physical goods or digital information, passes through these narrow points, giving whichever country controls or sits close to them enormous leverage.

Farrell and Newman identified two main ways to weaponize this interdependence. The first is the Panopticon effect, or surveillance power, named after Jeremy Bentham’s prison design. A state that controls key digital nodes can see almost everything flowing through them. The SWIFT financial messaging service is a classic example, and the United States has used it ruthlessly, helped by the fact that key infrastructure underpinning SWIFT sits in Virginia.

The second tool of control is the Chokepoint effect, the ability to cut off access to a critical node. This can be digital or physical. Again, SWIFT is a classic digital example, deployed to spectacular effect in 2022 after Russia’s invasion of Ukraine. But the chokepoint effect is just as potent in the physical world. The Red Sea crisis is a case in point: after the Israel–Gaza conflict, the Houthis began targeting ships passing through the Bab el-Mandeb Strait, the narrow gateway to the Suez Canal. In doing so, they weaponized one of the world’s most important maritime trade nodes, disrupting global shipping, forcing vessels to sail around Africa, and adding significant time and cost to global trade.

The trigger for writing this was a brilliant Economist article on how Xi Jinping has mastered the art of leveraging physical choke points, and is doing so in ways the United States is not. Washington today relies heavily on the threat of cutting off access to its dollar-based global financial system via SWIFT to discipline “errant” actors, especially states. But it does not work as well as intended. It is easy to impose sanctions but hard to lift them, which means thousands of measures have piled up over time. The United States lacks a strong sanctions enforcement network. Implementing sanctions is straightforward, but monitoring them is a different game entirely. As Russia’s experience shows, transshipment routes quickly sprang up to bypass restrictions on dual-use goods and export controls.

While sanctions still carry deterrent weight, their real-world effectiveness is often overstated, a view shared by many experts who track this space closely. The post-Ukraine-invasion reality is a case in point. China, meanwhile, is taking a different path, leaning into the physical choke points of global trade, where enforcement is often more visible, immediate, and disruptive.

In the aftermath of Donald Trump’s ill-conceived and self-defeating trade war, China managed to retaliate in ways that forced him into about-turns in multiple areas. Beijing exposed the spectacular dependency of much of the United States private sector, and even its own defense establishment, on Chinese supply chains. One of Xi Jinping’s most high-profile moves after Trump imposed triple-digit tariffs was to choke off exports of critical rare earth minerals. These minerals are essential for a vast array of industries, from automakers to fighter jet engines, and the move caused panic in U.S. manufacturing. Indian automakers, incidentally, face the same vulnerability.

As the Economist article noted, this is part of Xi’s deliberate strategy to create asymmetric dependencies: minimize China’s own reliance on external suppliers while making other countries dependent on Chinese exports. The goal is obvious. In a dispute, China can cut off access to critical goods, gaining enormous leverage.

There are a few plotlines here. For decades, one of the justifications for pushing globalization, both physical and financial, was that trade reduced the odds of conflict between countries. That bet has backfired. Now, talk of reshoring, friend-shoring, and near-shoring is rampant, and it is a megatrend worth watching.

The second is that, as Trump’s shambolic presidency dragged on, the United States further eroded its credibility abroad. Not that trust was sky-high before, but now, fewer countries take Washington’s word at face value. Years of misadventures and self-inflicted wounds have chipped away at American power. In an age where “enlightened selfishness” is the default foreign policy, the old model of globalization no longer works. Trade patterns are fragmenting; countries increasingly trade with neighbors or within ideological blocs instead of through the free-flowing, globalized system we were promised.

As the old Chinese curse goes, may we live in interesting times. We certainly are.

From the article:

Chinese victories have piled up in recent months. First came Mr Xi’s masterstroke in April: retaliating against American tariffs by choking off supplies of Chinese-refined rare-earth minerals and magnets critical to American industry. Within weeks, America’s $1.5trn carmaking industry, among others, panicked and Mr Trump sought peace. In July the European Union squealed in the lead-up to an eu-Chinese summit after flows of rare-earth minerals and battery technology to Europe slowed without explanation. Speeding them up then became a subject of negotiation.

It all appears in line with Mr Xi’s very careful plan. In 2020 he called for China to create asymmetric dependencies, by ridding its own supply chains of foreign inputs, while seeking to “tighten international production chains’ dependence on China”. At a meeting held in secret in April that year, Mr Xi told a powerful Communist Party body that such dependencies are “a powerful countermeasure and deterrent capability against foreigners who would artificially cut off supply [to China].” It wants other countries to depend on it without it depending on them.

Watch this:

https://youtu.be/6mOzr6s12qI?si=r6VGFuxKwdPGsF0B