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Opinion
Move over Strait of Hormuz. Innovation chokepoints are the ones to watch
The strength of a chokepoint lies not only in the force of the initial blow but in the scale of the long-term damage it leaves behind
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Albert Bakhtizin is director of the Central Institute of Economics and Mathematics of the Russian Academy of Sciences, a member of the academy and a professor at Lomonosov Moscow State University.
In interstate rivalry, countries have many instruments at their disposal, from military conflict to coercive monetary and financial measures.
What happens when rival powers have comparable strength, anticipate pressure through financial institutions and take pre-emptive steps to limit its effects, yet the confrontation continues? The struggle then shifts towards trade and sanctions, including attempts to block or control critical chokepoints in the global economy.
The first type of chokepoint involves corridors for traditional resources. For example, the closure of the Strait of Hormuz is like a shot from a weapon with enormous first-strike power but relatively little economic “memory” once the restriction is removed. Oil, liquefied natural gas and fertiliser flows are disrupted and prices jump, but the global trading system begins to adjust as alternative supply routes expand.
Over time, such blockages encourage the development of new routes, reducing the importance of the original chokepoint. Blocking a resource corridor can inflict severe short-term damage, but its economic impact tends to diminish over the longer term.
A second type of chokepoint concerns supplies of rare earth elements, which are critical to hi-tech industries. The problem is disruption to minerals whose alternative supplies are difficult to scale quickly. Here, what matters is not so much the force of the initial blow as the longer economic memory it leaves behind.
A recent International Monetary Fund (IMF) paper is particularly revealing. It asks how severe the macroeconomic impact would be on economies dependent on Chinese rare earths if they suddenly lost a large share of their supplies?
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