Trading Blows: What Russia’s Nuclear Reaction Means to Modern Warfare

Dr. Rebecca Harding, CEO Coriolis Technologies
February 28th 2022

Russia has put its nuclear forces on high alert.[1] This does not mean that a nuclear war is imminent. But it does two things: it makes NATO and its allies aware, if they were not before, that Russia is taking a “hair trigger” approach to nuclear deterrence – a nuclear response is justified if there is a non-nuclear or even if the rhetoric is to be believed, a non-military attack on Russian interests.[2]

So the second thing is to force the West into viewing economics (specifically trade and finance) as a sixth domain to warfare. The other domains of land, sea, air and space, and cyber and information, are all part of the approach to so-called “multi-domain warfare”.[3] As the EU, the US, NATO and the UK put increasing economic pressure on Russia, isolating its central bank and excluding its commercial banks from the Swift payments system, Russia’s rhetoric will become more threatening, and risks of miscalculation will increase with every incremental escalation.

It is almost trite to say that this is a seismic shift in the post-war structures that have guaranteed peace for more than 70 years now. The fact that Germany has committed to spending more than 2% of its GDP on the military and has agreed to send weapons to Ukraine is the ultimate testimony to how it views its role in Europe’s future now that its role as a civilian rather than a strategic power can no longer be sustained.

Germany and the EU have taken their “strategic autonomy”[4] to a new level over the past week. The current threat is from Russia, not China; the threat is current and military rather than economic. While this may change in the future, the reaction has been powerful – locking Russian banks out from Swift, increasing sanctions against individuals including President Putin, and banning the Central Bank from international financial markets.

What this does is demonstrate just how the nature of modern warfare has changed and has been changing since the Global Financial Crisis. On the one hand, from a Russian perspective, the current war in Ukraine is pure geopolitics: strategic access to resources and re-uniting cultural and linguistic ties that are misrepresented by current borders. This is an old industrial war and is currently being fought as such.

On the other hand, and from the perspective of the rest of the world, it is a war being fought in a multitude of domains, from the world of football sponsorship through military and traditional “industrial war” to global trade and finance; its endgame – control of the 21st Century economically, militarily, politically and culturally. The weapon of choice is the trade, investment and trade finance system.

Within this, the economic domain becomes one where the core weapon is to contain threats by shutting off the trade and the finance that enables technology to move into military contexts, that allows finance to be raised to buffer the effects of enforced financial isolation, or by limiting capital flows and investments to make sure that there is no Western money supporting the Russian economy.

The aim, of course, is to starve Russia of cash, create a run on Russian banks and rouble liquidity, and thereby cause the collapse of the Russian economy. Financial markets – currencies in the short term but over longer-term, investments as well – are being used as the nuclear option to constrain the actions of its political leaders.

This is a new paradigm. It is a world in which peace and war can co-exist; it resembles a game of “Go” where strategic encirclement is the goal rather than a zero-sum absolute victory.

In short, the West can no longer ignore the economic domain because the thinly-veiled nuclear threats point out exactly how Russia might react to anything it does not like. This is not a game that can be won – it is a strategic game where all the outcomes are sub-optimal. If we exclude Russia entirely from the Swift system, then there is a likelihood, not just that Russia switches off oil and gas supplies to Europe, but also that Russia accelerates the expansion of its own payments system. This is an economic nuclear option – two separate electronic financial systems built on separate technologies and internets with banks in the front line as they fight to implement ever-changing exclusions, sanctions and regulations. Dollar hegemony will be consigned to the history of lost empires.

During the Trump era, it became very clear that no one won from a Trade War. However, it was equally clear that Trade Weaponisation ran the risk of escalation into a full-blown conflict between ever-more nationalistic countries.[5] The risk has always been that economic nationalism would break down international structures of the post-war era and re-balance political power from the global era.

No one can win in the current conflict. The EU, the US, NATO and the UK will hold Russia to account so that its actions in Ukraine are seen as a “strategic failure” so its reputation is damaged. China will not overtly come to its aid because it cannot win from explicit involvement at this stage. The Allies cannot win because if they get involved militarily, there are unimaginable consequences. Everyone’s best plan is to know and understand the behaviours, beliefs and strategic cultures of their opponents. We have to hope that all sides realise that a strategic game is one that lasts for a long time, even forever, and where power ebbs and flows between strategic competitors because the alternative is Mutually Assured Destruction.

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[1] https://www.ft.com/content/4bf149f7-6f70-4d8b-bc69-13a6c1f56e33

[2] https://archive.mid.ru/en/web/guest/foreign_policy/international_safety/disarmament/-/asset_publisher/rp0fiUBmANaH/content/id/4152094

[3]https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/950789/20201112-JCN_1_20_MDI.PDFhttps://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/950789/20201112-JCN_1_20_MDI.PDF

[4] https://eeas.europa.eu/headquarters/headquarters-homepage/89865/why-european-strategic-autonomy-matters_en

[5] Harding, R. and Harding, J (2017): “The Weaponization of Trade – the great unbalancing of politics and economics” and “Gaming Trade – win-win strategies in the digital era” London Publishing Partners

 

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