This article first appeared in Forum, The Edge Malaysia Weekly on July 20, 2026 - July 26, 2026

Geoeconomics, as Google defines it, is “the study and practice of using economic tools such as trade policies, financial sanctions and supply chain control to achieve geopolitical goals”. It is part of economic statecraft, which includes economic warfare, something great powers have exhibited time and again.

Economic statecraft is now formally taught in most universities, being seen as an offensive weapon by a country’s neighbours. But one can glean the “how to” if one reads between the lines in deep economic and financial study.

In these times of massive change, exercising geoeconomic strategies would be a good, if not vital, move. Not having one would be tantamount to ceding the high ground in a battle. Sun Tzu would laugh sardonically.

Today’s scenario is complex and multi-layered. The rise of China into global leadership led by economics and prosperity breaks the unipolar world order led by the US. This top-line move presages new rules and regulations that China will bring with its participation in any activities. This also means that the decades-long arrangement for the US dollar as the main trading and settlement currency will be challenged (the much discussed “de-dollarisation” phenomenon).

The Americans’ move to reshore foreign direct investments means jobs are lost overseas and supply chains that fed those FDIs may no longer be sustainable if they feed only that foreign country. Worse, for whatever reason, the US president launched an unauthorised war against Iran that blocked the Strait of Hormuz, stopping 20% of the world’s crude oil from entering the market. Now, both sides want to tax any ships using the strait. Some countries have actually run out of petrol for their people. Additionally, incoming is what has been termed a “Super El Niño” that could potentially cause a food shortage emergency globally, among others.

There are four basic building blocks for geoeconomic strategy that would be applicable in today’s scenario — inputs, exports, food security and military security.

Let’s get to the first building block, inputs. Generally, this means the imports of raw materials that one’s industries need. At the moment, the big battles centre around lithium, with major mining countries in Africa (Zimbabwe being the latest) and China having stopped exporting in its raw form. Lithium is used in batteries like those for handphones and electric vehicles (EVs). One can buy the processed form for one’s industries, meaning a whole battery, but that ratchets up the cost and kills off a sub-industry in one’s country. Gold and silver are also in short supply, and both are needed in electronics manufacturing. How does one then secure supply at an affordable cost? Contract production, where all production goes to the contractor? Colonise the producing country? One would have thought such a thing was passé but Russia tried it with Ukraine recently and now the country faces ignominious ruin. In the end, history rarely favours the colonisers, who have faced much strain because of overreach.

If one doesn’t, then one has to rely on the current arrangements and watch whether contracts will continue to be upheld. After the Iran-US and Ukraine-Russia conflagrations, can one hope that contracts will survive? Will sellers be paid and will buyers receive their goods? What guarantees does one have?

An economic system is one where wealth circulates among the domestic agents. However, this is not sustainable, as that wealth will degrade due to inflation. There is a need for fresh capital to come into a domestic system via exports proceeds. If there isn’t any, one of the first signs other than inflation is rising money supply, which itself feeds into further inflation. The currency becomes worthless soon enough.

Safeguarding exports itself has a history that has been left out of textbooks generally. British sea power was used to escort convoys of merchant ships to their destinations and back to secure both imported goods and the vital revenue generated from exports. And no, it wasn’t only during World War II’s Battle of the Atlantic. In the 18th century, for example, a merchant convoy of 60 vessels had to be escorted by English warships. French naval ships intercepted the convoy off Cape St Vincent, sank an English warship and claimed 33 merchant ships as booty. More recently, oil tankers have been trapped in the Strait of Hormuz, and some have been sunk. The question is, do merchant ships need naval escort to their destinations, and do all trading nations have blue water navies? Certainly, the idea of armed escorts for pirate-infested waters, like off the Horn of Africa, have necessitated armed flotillas in the area.

One way this has been circumvented has been by rail. China’s Belt and Road Initiative has become very important in this regard. It has a weakness, however, as the railroad passes by several countries, and the danger of one country or another shutting down their section of the railroad and thus incapacitating the entire railroad is ever present. The same happened to the Russian gas pipeline when the country attacked Ukraine and gas was shut off in Ukraine and denied to everybody down the line. So how does a country deal with this?

One tool that has seen widespread use in economic statecraft is that of finance. Generally, a party being targeted is sanctioned, and that person is unable to transact financially. Countries have also been sanctioned. There are two key chokepoints that can literally isolate a country financially, the SWIFT payment system and undersea internet connections. Alternatives have recently appeared, including China’s CIPS (Cross-border Interbank Payment Systems), blockchains and satellite communications systems. These have been shown to circumvent blockages on the SWIFT system and safeguard communications from being blocked or eavesdropped upon.

Lastly, military security. Changes in warfare that have caught major powers flatfooted have appeared and given smaller nations giant-killing power. Drones, missiles, robotics and electronics are taking their place as force equalisers alongside nuclear weapons. Drones as used by the Ukrainians have destroyed the huge Russian tank force and stopped their hordes from advancing. Missiles have flattened Israel and turned their cities into piles of rubble. Robots are claiming their place on the battlefield in real time, and are no longer part of science fiction.

China reportedly plans to field one million robot soldiers soon. Electronic warfare, the dark arts, is now so prominent that it renders even drones and missiles invisible to radar. Behind it all is the industrial complex that keeps troops armed. Countries not only need these different methods of warfare but the industrial capacity to keep military supplies coming. Ukraine, for example, built a drone industry from nothing during wartime, and now produces some eight million a year. Also, do remember that the war machines of Germany and Japan were first defeated when their industries were destroyed by the Allies.

There it is, the justifications and “how to” for changing a country’s strategic footing. The end aim is to protect a country’s prosperity. To a greater or lesser degree, a country needs to adapt. Woe betide those that don’t.

What should Malaysia’s approach be?

Huzaime Hamid is chairman and CEO of Ingenium Advisors

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