Economic statecraft 2.0 – Hacking and political detention

Business risk: Increased risk of political detention and damage occurring to hacking of infrastructure.

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Economic statecraft on the rise. In a world of geopolitical competition and high levels of economic interdependence economic statecraft will thrive. This is what we’ve seen in the American politicization of trade policymaking and in the Chinese instrumentalization of regulatory measures to punish firms of governments with which it has political disagreements (remember when the Chinese stopped buying Norwegian salmon when the Chinese dissident Wen Xiabo received the Noble Peace Price?). Moreover, the use of economic statecraft has been spreading to other states (Qatar blockade and Saudi Arabia stopping to send patients to Canadian hospitals).

Detention wars. However this was just the beginning. Economic statecraft or the use of economic interdependencies to reach political goals, is reaching new heights these months. The first escalation was the use of detention as a political weapon in the trade conflict. First, there was the arrest of Meng Whanzhou, CFO and daughter of Huawei Founder Ren Zhengfei. She was arrested in Canada at the request of the United States for breaching US regulations banning dealings with Iran. While the extraterritorial application of US law (another form of economic statecraft using the pervasiveness of the US financial system, is nothing new, Trump’s politicisation of the arrest is new. The US President suggested that Meng Wanzou’s release could be part of a trade deal with China. By taking her arrest out of the legal and into the political sphere, all pretence of a purely legal process has been dropped. In reaction to Meng’s arrest, China arrested Michael Kovrig, a former Canadian diplomat, now working for the International Crisis Group. In this way, detention is becoming a political weapon and should concern businesspeople and other people travelling to China in these tense times.

Hacking Wars. Another example of the ramping up of the level of economic statecraft is the cyberconflict that is further developing between the US and Russia. A New York Times (NYT) report shows that US forces have stepped up operations in Russia. The US has placed implants on the Russian electricity grid. The fact that the US didn’t mind the NYT bringing out the news shows that the operations are meant to deter Russia of attacking the American grid.