Coercive statecraft is increasingly waged through control of supply chains, payment systems and trade flows, reflecting sharper geostrategic competition. Australia risks falling behind.
We still tend to view power in terms of ships, submarines and soldiers, but the new frontlines of conflict are financial. Economic coercion is now a core weapon of modern statecraft. Sanctions, entity blacklists and commodity export controls sit alongside military power in the strategic toolkit. Yet, despite a greater focus on economic security across government, Australia continues to approach it primarily from a defensive mindset. The nature of power has changed, and we need to adapt quickly.
Australia should adapt its financial statecraft strategy to suit the emerging environment. It should build a more resilient financial system with better crisis response mechanisms; better integrate government departments to facilitate financial warfare operations; and work with regional partners to improve its response time during crises.
What’s happening with financial warfare internationally reflects aspects of Fabian warfare, named after the Roman general Fabius Maximus, who wore down Hannibal through delay, disruption and exhaustion rather than direct battle. Today’s campaigns mirror that slow grind. The United States has sanctioned more than 700 Chinese companies through its Bureau of Industry and Security. The European Union has delivered its 17th sanctions package against Russia. These are not quick wins; they are sustained campaigns that erode technological progress, industrial resilience and investment confidence over time.
Modern Fabian logic is not purely about patience. Economic statecraft can shift rapidly from ‘wait and watch’ to ‘strike fast and hard’. Coordinated export bans, trigger a chain reaction of sanctions (‘sanction cascades’) and sudden restrictions on the movement of capital can have immediate and disruptive effects. The most effective strategies combine steady pressure with the ability to deliver decisive shocks when opportunities arise.
China demonstrates both approaches. It uses its control of critical inputs such as gallium, germanium and rare-earth magnets for sustained leverage. In June, rare-earth magnet exports from China were 38 percent lower than a year earlier. It has also imposed abrupt restrictions that destabilise markets overnight. This blend of attrition and sudden escalation forces adversaries to manage both the long grind and the threat of sharp disruption.
The modern logic of attrition is to degrade steadily while maintaining the option for rapid action. Strategic advantage comes not only from creating friction, delaying supply and raising risk, but also from acting decisively at the right moment.
Australia is a target and a potential player. As a top supplier of critical minerals such as lithium and rare earths, it is central to the global energy transition. That position also puts it within the scope of coercive countermeasures. Our institutional architecture remains fragmented, with responsibilities divided among policy agencies and the intelligence community. There is no cohesive economic statecraft function, no operational hub and no real-time coordination.
There has been progress. Treasury has expanded outbound investment screening. The Department of Foreign Affairs and Trade has integrated economic tools into foreign policy. The Critical Minerals Office and initiatives such as the US–Australia Climate, Critical Minerals and Clean Energy Transformation Compact are building supply partnerships. While necessary, these measures are largely defensive. The domain now demands coordinated offensive capability.
Australia needs to approach financial statecraft as a core strategic discipline. This will require three changes.
Resilience: the financial system must be able to tolerate friction. Minor disruptions—for example, to transactions or access to the SWIFT payment system or currency controls—can erode strategic confidence. Priorities should include dual-site domestic clearing for critical financial services; offline digital wallets to ensure continuity of central bank digital currency (a digital form of money issued by the Reserve Bank); and a more ambitious regulatory testbed for decentralised finance. The Reserve Bank’s digital currency consultations need to move from discussion to deployment.
Integration: by developing a dedicated economic and financial warfare detachment within Defence’s Information Warfare Division, the government could bring together Treasury, the Department of Foreign Affairs and Trade and the Australian Signals Directorate expertise to plan and execute operations. This could include tracking the evasion of sanctions, monitoring hostile capital flows and countering cyber threats to commodity infrastructure. Similar models are already in use in the US, Canada and Britain.
Tempo: in economic warfare, time is leverage. Sometimes the aim is to sustain pressure over years; in other cases it is to act within hours. Australia’s sanction responses remain slow, often taking months. We should consider a establishing a standard of mirroring sanctions issued by key partners within 48 hours, as well as pre-cleared classes of sanctions for rapid implementation. Minerals diplomacy can also be used to deny strategically important resources. Binding offtake agreements with Japan, South Korea, India and Singapore, for example, would lock in trusted supply and reduce vulnerability to coercion.
Global powers have used economic warfare tactics against Russia since its invasion of Ukraine, initially causing a decline in Russia’s GDP. It has since stabilised, but Russia’s long-term industrial capacity continues to erode. This has shown that Fabian strategies can succeed if they are backed by institutional stamina, coordinated execution and the capacity to strike when needed. The same pattern now characterises the US–China technology rivalry.
Australia cannot confuse attrition with delay. Modern attrition is about controlling tempo, knowing when to prolong and when to accelerate. Future strategic shocks are likely to start with blacklists, blocked transactions and sudden export controls rather an exchange of fire. Whether Australia remains a passive participant or becomes a strategist will depend on how quickly we adapt.
If we fail to treat financial coercion as a central element of statecraft, we risk becoming a ledger entry in someone else’s campaign. The time to stop reacting and start planning is now.