From Trade Giant to Strategic Actor: Rebuilding Europe’s Economic Statecraft

As the era of frictionless globalization gives way to systemic warfare, the European Union finds itself trapped in an institutional paradox: it remains a global economic titan, yet it lacks the strategic machinery to defend its own interests. While authoritarian regimes weaponise supply chains and financial flows with predatory speed, Brussels remains chained down in structural inertia and fragmented sanctions enforcement. To survive this shifting geopolitical landscape, Europe must move beyond reactive diplomacy. It is time to establish a dedicated agency for economic resilience – a structure capable of integrating intelligence, monitoring, and proactive statecraft – before the EU’s long-standing values shatters under the weight of a changing world.

The End of Globalization and the Rise of Systemic Warfare

While European leaders cling to the paradigm of previous era – one based on the rule of law, and fueled by globalization – the reality is catching up at an accelerating pace, crushing liberal assumptions. Traditional diplomatic methods, with slow sanctioning mechanisms collide against new authoritarian models – that are both fast and predatory. Consequently, the European model is wearing out, posing a fundamental challenge for the collective continent; the faster Europe adapts, the lighter the blow it will absorb during the coming trade wars era. This new era would be the beginning of far more dangerous conflicts that will establish a new world order. As systemic warfare leaves free trade behind, it lays the fundamentals for a world defined by the weaponization of every economical domain. Protectionism therefore will no longer stop at conventional tariffs – it will strike critical supply chains – such as the US-China trade tensions underscored by threat to restrict rare earths exports – and the financial sector, as demonstrated by the sweeping global sanctions that severed the Russian Federation from international finance following its aggression against Ukraine.

Beyond Washington: Europe’s Leverage

While the European Union remains stuck in structural inertia, its longtime primary ally – the United States – leads in the field of economic warfare. The War on Terror taught the US administration not only how to craft  crippling sanctions, but also how to weaponize its global fiscal dominance. Although the Department of the Treasury’s Office of Foreign Assets Control was initially viewed as toothless, it ultimately proved its critics wrong by deploying sanctions against North Korea or Iran. However the impressive story of American economic statecraft will not be rehearsed here, as Edward Fishman comprehensively covered in his book Chokepoints.

Unfortunately, in the coming era, US trade interests will not necessarily align with Europe’s, meaning Brussels is irrevocably losing an experienced partner skilled in economic conflict. Yet the ambiguity in future cooperation with Washington does not diminish Europe’s own potential and its capabilities. Brussels holds crucial leverages, – most notably the global payment system SWIFT, headquartered in Belgium. SWIFT demonstrated its potential during the Global War on Terror, when US sanctions targeting Iran’s nuclear program succeeded largely thanks to allied coordination worldwide and Iran’s disconnection from the network. This marked a historic milestone: the first-ever instrumentalisation of SWIFT for geopolitical purposes. Beyond the technical tools, Europe commands even greater assets: Europe remains the wealthiest market of the whole world – with its 450 millions of rich consumers – that accounts for approximately 16% of world’s goods trade. In the years ahead, anyone who secures preferential access to the European market secures a stable financial lifeline for their economy.

Keeping in mind the tools and potential the EU holds for upcoming conflicts, one might easily succumb to a false sense of security: if Europe has such a massive market and immense financial leverage, why bother worrying? Yet the problem lies not in a lack of potential, but in structural paralysis. Export controls and the entire sanctions architecture are deeply fragmented across competencies – dispersed among European Commission directorates, national capitals, and intelligence services. Systems that demand institutional coordination lack a unified structure; instead of a coherent governance, responsibilities are scattered across multiple domains. Under the EU treaties, member states transferred parts of their market sovereignty to a unified framework regulated in Brussels. Yet, rather than capitalizing on this rare consensus in trade policy, the EU essentially disarms itself. An even greater institutional failure occurs in the appointment of sanctions coordinators. Current coordinators are frequently political appointees lacking the rigorous technocratic expertise vital for managing sanctions regimes. The problem runs deeper still: even as political nominees, they lack real-time analytical support. The modern economic landscape operates as a web of interconnected dependencies, and managing it effectively requires not only unquestionable competence, but also an operational staff capable of intervening at a moment’s notice.

Structural Illusion

There is no bypassing the structural flaws plaguing the current system – particularly in sanctions enforcement, which is undermined by loopholes. This reality is illustrated by two critical case studies at the frontline of the EU’s economic warfare. First, there is the trade laundering of dual-use components: primarily following Russia’s invasion of Ukraine, European agencies recorded a sharp growth in exports to the Caucasus and Central Asia (such as Armenia and Kazakhstan). These shipments – consisting largely of microchips, advanced electronics, and other goods sanctioned for export to Russia – curiously end up in Russian defence manufacturing plants. The second major vulnerability is the shadow fleet: a fleet of aging tankers sailing under shifting flags that allows Moscow to successfully evade oil sanctions and bypass the G7 price cap on the open seas. Brussels responds to both crises with year-long delays, whereas agile smuggling networks adapt within days.

A Blueprint for Action: The European Agency for Economic Resilience

In an era of growing particularization of interests within the European Union, there is an urgent need for tools that demonstrate strength through unity. To achieve this, the current model of fragmented coordination must be replaced by a more efficient system. A European Department of Economic Warfare –  or, more broadly, a European Agency for Economic Resilience – is an absolute requirement for the dynamic years ahead, which the EU must face equipped with robust structures. Such a department would have a crystal-clear mission: foremost, designing proactive sanctions models combined with continuous monitoring and mapping of states that facilitate sanctions evasion. For the agency to be fully effective, it cannot remain merely a passive monitoring hub, as this would severely cut its potential. Instead, it requires dedicated intelligence and counterintelligence capabilities. Starting with counterintelligence, its mandate would involve analyzing supply chain security, mapping potential choke-points, and describing ways to safeguard European strategic interests. Simultaneously, its intelligence division would deliver hard-data intelligence reports – providing empirical evidence that no national capital could easily undermine.

The reality of the Union highlights the core obstacle to establishing such a centralized intelligence office: it would instantly trigger a backlash from member states protective of their own national agencies and competencies. Critics would also seize upon the financial and bureaucratic costs of such a new structure. However, this friction opens the door to a far superior alternative: a joint college of intelligence services drawn from all member states. Instead of building from scratch, intelligence services from across Europe could divide areas of responsibility and, under central coordination, execute targeted missions commissioned by the department. Crucially, if the gathered evidence originates from a body comprising their own national services, political leaders cannot simply dismiss the findings. Such a cooperative body would not only greatly enhance sanctions enforcement, but also forge an entirely new dimension of intelligence cooperation within Europe. This increased effectiveness would benefit every partner, carrying the potential to evolve into one of the world’s largest intelligence alliances.

Governance, Oversight, and Democratic Accountability

 To function effectively, the agency would pool existing EU competencies under crucial political oversight. Maximizing its democratic legitimacy requires dual supervision: the European Council – representing national leaders whose direct engagement is vital for strategic trust – would appoint the agency’s head by consensus. Simultaneously, technical staffing and operational rosters would be confirmed through a transparent process involving the European Commission and the European Parliament, ensuring both rigorous technocratic expertise and democratic accountability

Building this new resilience infrastructure should become Europe’s absolute priority in the new geopolitical era. The potential danger stems not only from the outside, but from within; the rise of euroscepticism is driven largely by institutional stagnation and inefficiency. Establishing agile institutions could not only strengthen Europe on the international stage, but also boost internal cohesion, which will be required in even harder times. While such an agency would have been considered mere wishful thinking just a few years ago, it now determines whether Europe will pass the ultimate test of its own sovereignty. Without deep structural reforms, our long-standing complacency will shatter under the weight of a changing world.