Read Part 1.
We have repeatedly discussed a unified and comprehensive model of national security. Considering the complexity and multifaceted nature of modern relations, it was established in a so-called broad sense, with the widest possible scope. In other words, security today is no longer limited to military and related aspects alone – it equally extends across virtually every layer of state and societal functioning.
Continuing the discussion from last week, it becomes evident that…
Measures of economic security nowadays manifest in two forms of modern economic warfare:
(1) Control over global and sub-regional supply and delivery; and
(2) Access to mineral resources.
In fact, these are the two main categories or arenas where the superiority of a particular country determines its geopolitical dominance. If we focus on the two leading actors – those shaping the system of economic order – the current situation is as follows:
To influence global supply and delivery, the United States primarily operates through tariff pressure. However, it is also worth noting that if the desired outcome is not achieved within the current framework, the US would need hundreds of billions of dollars to build an alternative supply and delivery system. In addition to the financial costs, the willingness of global partners to create such an alternative while bypassing China will also be a crucial factor.
In contrast, the People’s Republic of China largely relies on non-tariff countermeasures and sees its advantage in access to rare mineral resources. It is notable that the status quo in this regard is indeed impressive: 70% of the world’s rare mineral resources are extracted in China, while over 90% of global mineral processing and more than 80% of magnetic battery production also take place in China.
Threats of “Internal” Origin
In relation to economic security, this is a highly specific category which is of the so called “internal” origin – meaning that their causes are attributed to the preferences and practices of the ruling political and dominant business elite.
Such threats particularly characterize recent developments, and I would categorize them as follows:
(1) The destruction of even the minimum necessary separation between politics and business, leading to polygarchy – the extreme penetration of business interests into politics. This is a highly dangerous development for the security system, because in such a case, the business lobby will completely dominate the state interests and put them at its service unconditionally – without looking back.
(2) The “monetization” of foreign policy, which links external objectives to the pursuit of specific commercial gains. This phenomenon, too, has become particularly evident and persistent in our time.
(3) The collapse of the institutional governance system within the country in favor of oligarchic interests, which ultimately leads to the dysfunction of institutions. This flaw directly and unequivocally results in the deterioration of the overall national security – including economic security – system.
(4) The sharp increase in the role of non-state actors – particularly technology and media companies – and the institutionalization of their involvement (or interference?) in shaping state policy. Practically speaking, from the perspective of recent decades, we are witnessing the transformation of the classical model of state governance into a hybrid form – the so-called “techno-oligarchy.” It is highly likely that this trend will only continue to grow, which, once again, poses a serious challenge to the system of economic security.
Is the European Union Adequately Prepared?
It has become a somewhat bad practice for the European Union to act largely after the fact with regard to global processes. It seems that it prefers to be “second in command,” and is more concerned with observing events before making a specific decision.
Many may disagree with this view. However, I still believe that, having grown accustomed to the so-called “granted” peace and prosperity, the members of the European Union have allowed both the sharpness of their will and the firmness of their resources to dull. Alongside “strategic autonomy” and a series of protectionist measures, it seems to have become almost a rule within the European context that a major, fundamental, and dramatic event must occur to prompt a proper awakening. For Europeans, the war in Ukraine has become yet another “wake-up call.”
For example, as recently as December 27, 2023, the European Union activated the Anti-Coercion Instrument, which is essentially aimed at strengthening the Union’s economic interests – both within the EU and on the global stage. By speaking about the inadmissibility of economic coercion against the European Union and its member states, the Anti-Coercion Instrument defines the countermeasures whose implementation meets the set objective. Among the various options, the adopted act mentions the introduction of tariffs, restrictions on trade and the provision of services, aspects related to intellectual property, as well as certain prohibitions on access to foreign direct investment or public procurement.
Georgia must invest in its own functional competitiveness, effective security and inclusive development in order to reclaim its place within the existing “disorderly order”
In addition to general matters, the Anti-Coercion Instrument also outlines specific decision-making procedures intended to ensure an effective response. It further addresses the issue of compensation for damages resulting from improper actions by a third country.
Overall, the Anti-Coercion Instrument serves as one of the key complementary tools to the European Economic Security Strategy presented by the European Commission in June 2023, underscoring just how relevant this type of security has become for the European Union.
When Discussing Georgia’s Economic Security…
It is essential to highlight the main issue: the Georgian economy is small, and this very smallness is likely one of the key obstacles to its rapid growth. However, it is also a fact that in today’s world, “smallness” does not equate to isolation or detachment. Moreover, the interconnectedness of global economic channels (much like the “communicating vessels” principle in physics) and the widespread spillover of global shocks have made the distinction between “large” and “small” far more relative, at least in economic terms.
That is why it is extremely important that, when determining Georgia’s economic policy, we constantly monitor the developments taking place around us in order to critically assess them and determine what we can do with a “cool head.”
With this in mind, we will summarize several opinions (already known and repeatedly expressed in the past). In particular, to ensure the stability and self-sufficiency of our country’s economic system, its competitiveness, and real growth, we should think about and care for:
• Closer integration with developed economies. This will have practical significance for the qualitative improvement of our trade and financial flows, as well as for the transfer to us and implementation of advanced technologies and knowledge.
• Expansion and diversification of export markets. It is a banal truth that dependence on any particular market means economic vulnerability and is risky from the point of view of national economic security; Accordingly, the greater the number of sources of “expenditure” and “income,” the greater the space and freedom for national and state development. All of this is also related to free trade agreements and trade associations.
In the face of growing economic nationalism around the world, we must also think about and care for:
• Not only about the quantitative, but also about the qualitative side of investments. Given the current global and regional threats, I believe it is unacceptable to consider any investments desirable for our country. It is time to learn how to distinguish between them and select the right ones. To this end, we consider it expedient to introduce a mechanism for reviewing investments, known as “screening,” into legislation. It should also be noted that many advanced economic systems currently use this method.
• Timely allocation of necessary resources and support toward the country’s intellectual capacity. Without ensuring such “intellectual self-sufficiency,” we are doomed to witness the outflow of highly valuable talent from Georgia, thereby hollowing out our competitiveness and growth potential in the near future.
In addition to the above, we would consider the following as practical measures:
• The issue of economic security should be given a prominent and important place in Georgia’s national security doctrine. Such special attention is once again dictated by the modern and multifaceted understanding of “security.” We must agree that national security is inconceivable without a comprehensive set of economic measures, as in this world no one considers or engages with the weak, the poor, and the dependent as a worthy partner.
• Within the format of the National Security Council to be reestablished, the economic security dimension should be strengthened. One possible development could be the creation of a separate Economic Security Council or its institutionalization within the structure of the National Security Council.
• When discussing a structural approach, we should also consider the possible introduction of the position of Minister of Economic Security within the Government of Georgia, with an appropriate area of oversight and functions.
• Whether under the auspices of an Economic Security Council or a Minister of Economic Security, one of the core tasks should be the continuous monitoring and analysis of risks and threats to Georgia’s economic security. This process will be reflected in a periodic economic threat assessment document in an objective format (similar to the practice in the European Union). Among other necessary issues, the document will evaluate short-, medium-, and long-term risks to the country’s economic security, as well as recommend measures for their mitigation and management.
• Alongside the doctrinal approach, we should also discuss the advisability of legislation aimed at ensuring economic security (for instance, a “Georgian Economic Security Act”). When working on such legislation, special attention should be paid, among other things, to the following: (a) Coordination among government agencies during times of crisis; (b) The ability to rapidly shift from one delivery and supply system to another on a global or regional scale, as well as reducing excessive dependence on any single system; (c) Promoting innovations in critical sectors.
The implementation of these or other necessary measures will only be possible under conditions of normalized domestic political processes in Georgia. We neither have the “luxury” nor the resources to continue functioning amid “political business” and disrepute existing outside institutions, focusing exclusively on static concerns of preserving or gaining power.
Today, the country faces a task for which there is virtually no alternative: to invest in its own functional competitiveness, effective security, and inclusive development in order to reclaim its place within the existing “disorderly order.”
Analysis by Victor Kipiani, Geocase Chairman
