Does Economic Interdependence Prevent War or Merely Alter the Nature of Conflict?

In winter 2022, a natural gas pipeline became central to an economic conflict. As the Russia Ukraine war intensified, Russia’s state-owned Gazprom halved its pipeline exports to Europe  and, by September, fully shut down Nord Stream, which had supplied nearly a third of Europe’s gas. In response, Western governments froze approximately US$300 billion in Russian central bank reserves and excluded major Russian banks from the SWIFT global payment system.  These were not traditional military actions—freezing assets does not achieve territorial gains or secure peace. Instead, the strong economic ties between Russia and Western countries became the primary arena of conflict. 

This situation challenges liberal peace theory, which traces its intellectual origins to Immanuel Kant’s 1795 essay Perpetual Peace and is advanced by scholars such as Michael Doyle. The  central argument posits that trade renders war prohibitively costly. From this perspective,  countries interconnected through complex supply chains and commerce have strong incentives to maintain peace. More broadly, the theory asserts that global trade, democratic norms, and shared institutions inherently suppress conflict. This premise underlies the formation of the modern European Union and the post-World War II global market. It also motivated Western  powers to pursue the integration of China into the global economy, with the expectation that  economic engagement would moderate China’s geopolitical ambitions. 

Recent events have challenged this optimism. In 2021, Germany relied on Russia for over half its natural gas, yet this dependence did not prevent the escalation of the Russia–Ukraine war in 2022. Although Germany was not directly involved, its reliance on Russian gas created significant vulnerabilities as tensions rose. Instead of preventing crisis, these economic ties gave both Russia and its European partners considerable leverage. A similar pattern is evident in US-China relations. Despite trading hundreds of billions of dollars annually, both governments have increasingly restricted bilateral trade. In 2025, Beijing imposed stricter controls on exports of rare earth elements and magnets essential to US manufacturers, and after a temporary truce with Washington in October, suspended these restrictions for only one year.  In both cases, interdependence did not eliminate conflict but shifted it to the economic sphere. 

This debate traces back to Norman Angell’s 1910 work, The Great Illusion. Angell contended that Europe’s increasing financial integration rendered territorial conquest economically disastrous. The outbreak of World War I soon undermined this optimism, yet the fundamental  question of whether commerce prevents war has remained central to political science discourse. 

Nations interact through interconnected networks of trade, finance, and telecommunications. Keohane and Nye argue that breaking these links is often so costly that governments seek  cheaper, non-violent solutions to disputes. Some research supports this view, suggesting major trading partners are less likely to engage in conflict. However, Barbieri’s analysis of historical data found that deep trade ties can sometimes increase the likelihood of militarized disputes. Scholars remain divided on the best ways to measure interdependence.

The ongoing semiconductor dispute between Washington and Beijing demonstrates how trade networks can be weaponized. In October 2022, the United States imposed strict export restrictions on advanced chips and manufacturing equipment destined for China. These measures targeted companies such as Nvidia, which designs advanced chips, and the Dutch firm ASML, which produces specialized equipment for chip manufacturing. By early 2023, China’s semiconductor output had declined by about 17 percent, and leading chipmaker SMIC suspended expansion plans due to limited access to key equipment. It is difficult to determine how much of this decline resulted from sanctions versus weak consumer demand. Production  recovered by mid-year, indicating that US controls disrupted a competitor but did not cause  lasting harm. Nonetheless, the objective was clear: Washington used economic measures to  deliberately weaken a rival’s industrial base without resorting to military action. 

Farrell and Newman introduced the concept of weaponized interdependence. A country at the  centre of global financial or information networks can use its position to monitor or pressure  others. Systems such as international payments, technology supply chains, and undersea  internet cables can serve as instruments of state power. Critical nodes in the global economy are not merely neutral pathways; they are active tools of control for those who possess them. 

Ultimately, a country’s position within global networks is highly significant. Because  Washington controls both the US dollar and the SWIFT system, it can independently freeze a  rival’s assets or block their banks from the global market. Conversely, Russia and Europe  viewed their close ties as a vulnerability due to their dependence on gas. Centrality in the network confers power, while peripheral positions increase vulnerability. Interdependence is neither neutral nor inherently peaceful; it shifts the locus of pressure rather than eliminating it.  Economic pressure differs from traditional warfare. Denying an export license or freezing a  central bank does not cause direct casualties. Trade sanctions typically result in less bloodshed  than military action. In this respect, liberal peace theory retains some validity: overall violence  may decrease even as tensions rise. Nevertheless, governments remain cautious. This is evident in “de-risking” policies and investments, such as reshoring manufacturing, diversifying suppliers, and stockpiling critical minerals to mitigate supply risks. Countries that once prioritized economic integration are now actively seeking to separate their economies. 

However, the belief that economic conflict is a more humane option than military conflict needs closer examination. Economic pressure is not a harmless or victimless replacement for violence.  In his 2022 book The Economic Weapon, historian Nicholas Mulder explains that modern sanctions grew out of military blockades meant to starve civilian populations until their governments gave in. Sanctions can seriously harm civilians, even without direct military  action. For example, shortages of medicines like insulin and epilepsy drugs have occurred. Since about 80 percent of Russia’s pharmaceutical production depends on imported materials, reduced Western supplies and disrupted transport have led to ongoing shortages of cancer and hormone treatments. Although Western sanctions were meant to target the Kremlin’s military, regular people suffered the effects. Even without direct violence, the impact is still significant. The line between economic measures and military conflict is much less clear than supporters of liberal peace theory suggest.

In conclusion, global commerce has not made conflict obsolete or irrational. While it has increased the costs of traditional warfare, deep economic integration has also created new vulnerabilities and tools of coercion. Global finance, technology supply chains, and energy infrastructure now cause harm that once required military intervention. Economic interdependence has not ended conflict; it has modernized confrontation, making it more potent and potentially more dangerous. This topic has become a central argument especially in today's world, where economic pressure is very commonly used in international conflicts. Policymakers should recognize global economic reliance as a significant strategic vulnerability.