Small Wars Journal

Needed: A national economic security lens

Needed: A national economic security lens

By Juan C. Zarate

Last October, a U.S. intelligence report to Congress revealed that foreign economic espionage worth billions of dollars is being driven by China and Russia and represents a "significant and growing" threat to the nation's prosperity and security.

The Internet has accelerated and amplified economic vulnerabilities given the ease of digital access to mass amounts of data, low barriers of entry to cyber intrusion, and the useful cloak of online anonymity. But this threat to our national economic security isn't confined to cyberspace.

In the interconnected global environment, economic power, access to resources, and cutting edge technologies are defining both power and vulnerabilities. China and Russia have already demonstrated their willingness to engage in a new geo-economic game. It's one the United States needs to learn to play quickly.

During a diplomatic spat last year with Japan, China suspended its export of rare-earth minerals - necessary for key high-tech manufactured items like hybrid engines and solar panels. China has also used its undervalued currency, subsidies, and the weight of its market - both current and future - to demand local content and partnership concessions from foreign companies.

The resulting transfer of technology and marginalization of multinational companies has allowed Chinese companies to take larger chunks of the global solar, wind turbine, and high-speed rail markets. At the same time, Chinese infrastructure and extraction projects in Africa, Central Asia, and Latin America are facilitating Chinese access to both raw materials and political influence.

Russia hasn't hesitated to play the game either, using its oil and natural gas resources to exert political pressure while padding the Kremlin's coffers. In 2006 and again in 2009, Russia shut off natural gas supplies to Europe through Ukrainian pipelines to extract concessions from the Ukraine and put political pressure on a rival. Russia - through Gazprom - has also followed an acquisition pattern of "plugging the holes" of alternate channels of energy supply to Europe in the Balkans, Poland, and perhaps now in Greece.

The United States is unprepared to play this new geo-economic game. Our current approach to economic security abroad reflects a reticence to meld political and economic interests, something Secretary of State Clinton has begun to highlight. This underscores a long-standing structural divide between national security policies and the role of the U.S. private sector in the international commercial and financial system.