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OPINION NOVEMBER 28, 2025 | The Indian Eye 10

Economic Warfare and

National Security Strategy

Major powers are increasingly employing sanctions and financial controls to advance strategic

objectives. India must incorporate economic statecraft into its national security strategy and boost
domestic capabilities to protect sovereignty in an increasingly contested global order

SHAILENDRA GAVADE

lobalization has made modern
economies rely on complex,
Gdispersed manufacturing,
transportation and logistics networks.
Consequently, global supply chains
have become a key battleground for
economic warfare in the 21st century.
Semiconductor chips, shipping lanes
and payment systems are the key
battlegrounds of the new economic
warfare. Tools employed in economic
warfare have, of course, deep histor-
ical roots. The British Navy used na-
val blockades during the Napoleonic
Wars to stop French trade and com-
merce. The Allied forces’ blockades The relevance of economic warfare did not diminish after the Cold War. In fact, it became even more relevant as globalization grew (IDSA)
against Germany caused shortages
and unrest during World War I. Aeri-
al bombings were undertaken during Plan of Action (JCPOA). It showed limited China’s chip output to less every sector of the Russian econo-
World War II towards targeting indus- the effectiveness of export controls than 7nm. The CHIPS Act incentiviz- my. Central Russian banks were cut
try and transport hubs to disrupt the and sanctions as measures of econom- es US industry to produce locally and off from SWIFT, and Russian assets
adversaries’ wartime capacity. The ic warfare. reduces dependence on East Asia. amounting to approximately US$
Incheon Landing in the Korean War Sanctions make it difficult for 250–350 billion were frozen. Vital
of 1950 cut off North Korea’s supply WEAPONIZATION OF SUPPLY countries to access markets, technol- technologies were banned from be-
lines, forcing them to retreat quickly CHAINS ogies and financial systems. The fact ing exported. Western countries also
and shifting the course of the War. that the US dollar and Western banks restricted maritime insurance and
The relevance of economic war- he economic coercion resulting are powerful has made these sanctions imposed price caps on oil. The rou-
fare did not diminish after the Cold from the weaponization of sup- even more effective. After 9/11, such ble fell sharply, investments dried up,
War. In fact, it became even more Tply chains can have a significant economic warfare methods were also and capital left. In response, Russia
relevant as globalization grew and financial impact. China stopped ex- used to fight terrorism and its perpe- increased commerce with China, In-
economic warfare tools became polit- porting rare earth elements to Japan trators. The ability to refuse access dia and Turkey. Sanctions catalyzed
ically driven instruments of influence. in 2010 following a territorial dispute. to SWIFT (Society for Worldwide de-dollarization and the growth of
The US put sanctions on India after China accounts for 80–90 per cent of Interbank Financial Telecommunica- new trade networks in the Global
it tested nuclear weapons in 1998 (as the world’s supply of rare earth ele- tion) has made sanctions a formidable South. They hurt Russia’s economy
it did after 1974). India was denied ments. The Houthis’ operations in the weapon. It allows freezing econom- and technology, but they didn’t mod-
access to nuclear fuel and technology Red Sea also showed how controlling ic reserves or imposing secondary ify its strategic position. This shows
due to these sanctions. Iraq faced oil trade routes can hurt economies by penalties. Such coercive economic that sanctions are good at hurting but
embargoes and limits on trade for its breaking supply chains. The recent punishments shape the strategic envi- not so good at forcing political change
invasion of Kuwait in 1990. However, US–China technology rivalry centers ronment before a confrontation. Sec- in stronger states.
the most significant sanctions were on semiconductors, which are essen- ondary sanctions are economic pun-
those imposed on Iran in 2006 for its tial for both military and digital capa- ishments imposed on allies/partners ECONOMIC WARFARE
nuclear programme. The harsh sanc- bilities. Washington seeks to prevent of the primary targets. The US dollar CHALLENGES AND INDIA’S
tions cut Tehran from global bank- Beijing from acquiring advanced chips is the world’s main reserve currency, RESPONSE
ing, foreign investment and energy and tools through export bans and and systems like SWIFT act as the cen-
exports. These long-lasting economic political pressure. For example, it has tral nervous system of global finance. ndia’s GDP of almost US$ 4 tril-
sanctions were a significant factor in stopped ASML from supplying EUV Russia was imposed with severe lion makes it the fastest-growing
Iran’s decision to engage in talks lead- lithography machines and Nvidia from sanctions post its invasion of Ukraine Iand fourth-largest economy in
ing to the 2015 Joint Comprehensive selling advanced chips to China. It has in 2022.[11] It affected practically Continued on next page... >>

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