The term geopolitics has experienced a notable revival over the past decade. While the underlying dynamics it describes never truly disappeared, shifts in how we conceptualize global power and statecraft led to a temporary decline in its usage. As our understanding of international relations evolved – particularly during the post-Cold War era – focus shifted toward economic interdependence and globalization, often sidelining traditional geopolitical analysis.
The term itself was coined by Rudolf Kjellén in the early 20th century. Kjellén, a Swedish political scientist, developed the concept as part of broader organic state theory, which viewed the state as a living organism. According to this framework, state power is derived from five interrelated dimensions: Geopolitics (geography), Demopolitics (population), Eco-politics (economy), Sociopolitics (society), and Cratopolitics (governance). Together, these dimensions offer a comprehensive yet complex lens through which to understand the sources of state power and their evolution over time. Changes in these dimensions are typically gradual, except during periods of crisis, when transformations can be rapid and profound.
The concept of geopolitics gained renewed prominence during the Cold War, particularly through the work of figures like Henry Kissinger and Robert Kaplan, who used it to frame strategic competition between superpowers. Today, in an era marked by trade wars, shifting alliances, and contested global norms, geopolitics has re-emerged as a vital tool for interpreting the interplay between geography, power, and policy. While Rudolf Kjellén is credited with formalizing the term geopolitics in the early 20th century, he was neither the first nor the last to emphasize geography’s central role in shaping a nation’s strength, stability, and strategic behavior. Yet, the idea that geography influences national strategies and sources of power, has deep historical roots and enduring relevance. Historical figures like Napoleon Bonaparte famously underscored this connection, reportedly stating, “If you know a country’s geography, you can understand and predict its foreign policy.” This insight remains strikingly relevant in today’s geopolitical landscape.
In more recent times, scholars such as Jeffrey Sachs and Jared Diamond have independently explored how geographical factors, such as access to navigable rivers, climate, disease burden, and natural resources, contribute to disparities in national wealth and development. Theirs and other’s work has helped revive interest in geography as a foundational variable in sources of state powers as well as global inequality. The 2024 Nobel Prize in Economic Sciences, awarded to Daron Acemoglu, Simon Johnson, and James Robinson, further reinforces this perspective. While their research primarily focused on the role of institutions in shaping long-term prosperity, it also acknowledged geography’s influence in shaping the institutional paths countries take. Their findings show that inclusive institutions, those that promote participation, protect property rights, and uphold the rule of law, are essential for sustained economic growth, but these institutions often emerge in environments where geography has enabled more equitable development. For a more accessible and engaging exploration of how geography continues to shape global politics, Tim Marshall’s work – particularly Prisoners of Geography – offers compelling narratives that connect physical landscapes to strategic behavior and international relations.
The term geoeconomics was coined by Edward N. Luttwak in the early 1990s, notably in his 1990 article “From Geopolitics to Geo-Economics: Logic of Conflict, Grammar of Commerce”. The meaning of the term is largely included in the term geopolitics already it its early use during the 1920th. Nevertheless, Luttwak observed that while traditional geopolitical competition had historically relied on military force, the Cold War era marked a shift: both superpowers increasingly pursued strategic objectives through economic means. His central insight was that economic competition among nations could mirror the strategic logic of military conflict, adversarial, zero-sum, and power-driven. In its modern usage, geoeconomics refers to the study of how states use economic instruments, such as trade policy, investment flows, sanctions, and foreign aid, to achieve geopolitical goals. It is about wielding economic power as a tool of influence or coercion in international relations, often blurring the line between commerce and strategy. This perspective has gained renewed relevance in the 21st century, particularly in the context of U.S. – China rivalry, where tariffs, technology bans, and supply chain realignments are used as strategic levers. As Luttwak foresaw, the battlefield of global power has increasingly shifted from military arenas to economic domains.
Just as military power varies significantly across nations, so too does economic power. Most countries, on their own, lack the capacity to wield either form of power decisively to achieve strategic objectives at the expense of others. Only a select few possess the scale, resources, and institutional reach to wield real influence, whether through military force or economic tools such as trade policy, sanctions, foreign aid or investment leverage. This disparity gives rise to a global hierarchy of influence. At the top are superpowers, capable of shaping international norms and exerting global influence. The United States is often considered the sole superpower, though there is ongoing debate about whether China and Russia also qualify. While both countries have global ambitions and significant capabilities, many analysts argue they are better described as regional powers with global reach, particularly given their focus on asserting control within their immediate spheres of influence.
Beneath the superpowers are the regional powers, states that exert significant influence within a defined geographic area. According to the European Consortium for Political Research (ECPR), there are approximately 20 regional powers globally. Among them are countries like Brazil, France, Germany, India, Iran, Japan, Mexico, Nigeria, Saudi Arabia and Turkey. These countries possess the economic, political, and sometimes military capacity to shape regional dynamics, influence neighboring states, and act as anchors of stability or sources of competition. Importantly, regional and global power is not just a function of raw economic size or military strength. It also depends on a state’s ability to build coalitions, shape institutions, and project soft power, factors that are increasingly central in today’s geoeconomic landscape.
In international relations, a common term for countries that can meaningfully influence the behavior of others is hegemon. A hegemon is a state with the capacity to induce foreign governments, firms, or institutions to take actions they would not otherwise choose, either through incentives or pressure. Both superpowers and regional powers act as different types of hegemons. A regional power can, within its sphere of influence act as the hegemon but outside that, only be a strong member of the superpowers sphere of influence. There are two primary mechanisms through which hegemons exert influence:
- Positive inducements – offering benefits in exchange for cooperation (the ”carrot”).
- Negative consequences – threatening or imposing costs for non-compliance (the ”stick”).
Examples of this in the real world is Chinas offering of loans and investments through its Belt and Road Initiative to countries that allow Chinese firms to control strategic infrastructure or the USAs offering of aid through the Marshall Plan to European nations that resisted communism during the cold war. The current US threat of extra tariffs due to anti-US policies can also be understood through this lens. These strategies do not always succeed. The effectiveness of hegemonic influence depends on the credibility of the promise or threat, the strategic value of the target country, and the broader geopolitical context. Nonetheless, the ability to shape the choices of others, without direct coercion, is a hallmark of hegemonic power in both military and geoeconomic terms.
To assess the effectiveness of hegemonic threats or incentives, one must consider the broader system linking hegemon and the target. Influence doesn’t occur in isolation, it depends on whether the target is integrated into the hegemon’s political and economic framework, and whether it intends to stay or break away from it. A hegemon can share benefits with other countries, making it more attractive for them to remain within its sphere of influence. Conversely, it can restrict access to those benefits, through sanctions, tariffs, or regulatory barriers and thereby making non-compliance costly. Each country must weigh the value of staying in the system against the cost of stepping out. Even if a hegemon’s demands are undesirable, the threat of exclusion or punishment may tip the balance toward compliance.
Real-world examples illustrate this dynamic:
- The United States’ use of tariffs in trade disputes, particularly during its trade war with China, serves to limit other countries’ access to the lucrative U.S. market unless they align with American trade expectations.
- The European Union’s regulatory standards function similarly. While they can be seen as trade barriers, many countries and firms choose to comply because the benefits of accessing the EU market outweigh the costs of adaptation.
These examples highlight key principles of geoeconomics, which sheds light on how economic instruments are strategically deployed in global power struggles. Three tools in particular, foreign aid, sanctions, and regulatory standards, have gained increased attention in recent years for their growing role in shaping international relations. Here, I will address foreign aid and sanctions in more detail. It is good to remember that regulatory compliance offers other types of trade barriers, even well-meant regulations. For example, a local community´s decision to source locally (for whatever reason), is a clear trade barrier for actors outside what is considered local.
Foreign aid is often viewed as a humanitarian or developmental instrument, but in the realm of geoeconomics, it functions as a strategic policy tool, essentially, a form of “pay for policy.” Most foreign aid is not unconditional; it comes with attached expectations or policy alignments. These may include commitments to infrastructure development, education, healthcare, or the promotion of values such as human rights and gender equality. From the recipient’s perspective, accepting aid involves a cost-benefit calculation: is the value of the aid greater than the political or ideological cost of complying with the donor’s conditions? This dynamic is especially relevant in the context of systemic alignment, whether a country chooses to remain within a particular hegemon’s sphere of influence or shift toward a competing system. While foreign aid typically flows from wealthier democratic nations to less developed states, it also includes targeted funding to non-state actors. For example, Iran’s support for Hezbollah, Hamas, and the Houthis in Yemen represents a form of strategic aid aimed at expanding influence and shaping regional dynamics, another version of “pay for policy.”
Economists often criticize foreign aid for its limited impact on long-term development, questioning its efficiency as an economic tool. However, this critique often overlooks its strategic utility. One of the core objectives of foreign aid is to anchor recipient countries/non-state actors within a specific hegemonic system, thereby reducing the likelihood of defection to a rival power bloc. A clear example is the long-standing U.S. aid to Egypt. While its economic impact has been debated, its strategic value is clearer: it helped align Egypt with U.S. interests during the Cold War, distancing it from Soviet influence and later supporting peace with Israel. Through a geoeconomic lens, this aid served to bind Egypt to the U.S.-led system, reinforcing American influence in the Middle East.
Sanctions and trade embargoes are among the most widely used geoeconomic instruments. They represent commercial and financial penalties imposed by a hegemon on a targeted country, organization, or individual. If foreign aid is a form of “pay for policy,” then sanctions are its counterpart: “penalize for non-compliance to policy.” Like foreign aid, sanctions force the target to make a strategic calculation: is the cost of punishment greater than the perceived harm of complying with the hegemon’s demands? Beyond their direct impact, sanctions also serve as a signaling function, sending a clear message to other nations that defying the hegemon carries consequences. For example, the United States’ use of tariffs in recent trade disputes acts as a warning to trading partners about the risks of misalignment.
Sanctions are politically popular not necessarily because they are effective, but because they offer a middle-ground strategy, a way to exert pressure without resorting to military force. Sanctions occupy space between diplomatic gestures (e.g., public statements or letters) and military intervention, making them a preferred tool for signaling disapproval or enforcing norms. However, the effectiveness of sanctions is widely debated. Research in the field suggests that in over two-thirds of cases, sanctions fail to achieve their intended goals. There is little conclusive evidence that sanctions alone lead to meaningful policy change in the targeted country. Despite this, their use has enhanced, by some estimates, increasing by over 1000% since the early 2000s.
For sanctions to work, two conditions must be met:
- The cost to the target must be severe enough to compel compliance.
- The cost to the sender must be low enough to sustain pressure while offering a pathway for the target to re-enter the hegemon’s system.
Most modern sanctions fail because they lack this dual logic of coercion and inclusion. Sanctions on countries, which clearly consider themselves outside the sender’s hegemonic system, are set up to fail. Without a credible offer of reintegration or benefit, sanctions often harden resistance rather than encourage alignment. Despite their poor track record, sanctions continue to be used because they send a clear message of disapproval and allow governments to act without direct confrontation. This is known as the sanction paradox: their appeal lies in their symbolic and strategic value rather than their economic outcomes. Researchers like Daniel W. Drezner and others, have over decades addressed this issue.
Geoeconomics teaches us that economic hegemony is not solely built on the foundation of a large, strong, and self-sufficient economy. Equally critical is a nation’s ability to build coalitions and shape institutions that extend its influence and embed its values into the global system. A powerful example of this dynamic is the post-World War II world order, where the United States and the Soviet Union emerged as competing hegemons in a bipolar system. Despite their ideological rivalry, both powers recognized the strategic necessity of institutional collaboration. Together, and often through competition, they contributed to the creation and maintenance of key international institutions such as the United Nations (UN).
Institution-building is inherently complex and never truly complete. It requires sustained effort, negotiation, and compromise. Yet, over time, these institutions became platforms for managing global economic relations, resolving disputes, and promoting stability. Their endurance was partly driven by a shared understanding among major powers that the alternative, unregulated competition or global military conflict, was too costly, especially in the shadow of nuclear escalation and the memory of two world wars. In this context, coalitions and institutions serve not only as tools of cooperation but also as mechanisms of influence. They allow hegemons to set rules, shape norms, and create systems where alignment with their leadership becomes both beneficial and expected. Therefore, keeping international institutions alive but relatively weak (the hegemon needs to be able to control the institution to large extent) is a great strategic tool for hegemons.
Following the collapse of the Soviet Union, the United States emerged as the undisputed global hegemon, supported by a network of institutions and coalitions forged during the Cold War. However, the reemergence of an imperialistic Russia and the rise of China as the world’s manufacturing hub have fundamentally challenged this order. The United States remains powerful, but its relative economic dominance has declined. More importantly, its primary coalition partners, Europe and Japan, have also lost economic significance, weakening the collective weight of the U.S.-led system. As a result, the benefits of remaining within this system have diminished, while the costs of exiting it have become less prohibitive.
This shift has had real-world consequences. For example, the sanctions imposed on Russia in response to its invasion of Ukraine have proven less effective than anticipated. While they have inflicted economic pain, they have not fundamentally altered Russian behavior. One reason is that the strategic value of remaining in the U.S.-led system has eroded for countries like Russia, especially when alternative partnerships, with China, Iran, or others, offer viable economic and political lifelines. This shows that the switching cost, changing systemic membership to other hegemons systems, is considered low. Many of the more neutral countries (judged on their abstained from UN votes or avoided sanctions against Russia about condemning Russia’s invasion), seems to value the cost of non-compliance with the suggested sanctions as lower than the gains.
In geoeconomic terms, this reflects a decline in the leverage that the U.S. and its allies can exert through traditional tools like sanctions. Without strong coalition partners and compelling institutional incentives, the carrots are fewer and the sticks less intimidating. This is the essence of geoeconomics. Understanding that economical tools can be used to obtain strategic goals for individual countries. These tools, when issued on other countries, can contain benefits or drawbacks for the targeted country. Furthermore, the effectiveness of these tools depends also on whether the two countries are members of the same hegemons influence sphere or not. Nevertheless, the geoeconomically toolbox has been extended and more in use over the last decade. The usage of foreign aid and/or sanctions will increase to make the target country comply with a certain policy issued from a regional power or a superpower. The last decades have shown a shift in favor of sanctions over foreign aid as the primary tool. This signals a harder penalizing world over a softer helping one. Even the change in foreign aid as to be more specified in terms of who sends and who receives and for what policy, favors more direct influence on potential benefits of inclusion (aka Wagner group in the Sahel region or Iran’s proxy network in the Middle East). Regardless of tool used, the aim is to achieve a certain country’s strategic objective, by using less military (too risky/costly and uncertain in outcome, see Russia in Ukraine) and more economical based tools. Therefore, is the coalition building and the evolvement of institutions is as important as the geoeconomically tools them self. This is the glue that holds a hegemonic system together. Economical tools plus coalition building are geoeconomics at its core. This leads to that a modern paraphrase on Napoleon Bonapartes quate on geography could sound like, “if you know a country’s trading partners and its values, you can understand and predict its foreign policy”. But if the switching cost together with potential benefits for either staying or leaving a certain hegemonic system is low, more switching will occur which will lead to more instability. Unless these changes, the world is heading for a multi-polar world order (multiple hegemons but all of a more intermediate size), but with weak global institutions, regional trading blocs (a multi-polar world tends to be less globalized), more trade disputes (intermediate size hegemons tends to use threats more often), foreign aid may take form of more clear “pay for policy” (intermediate size hegemons uses foreign aid to pull new members into their sphere) and maybe even more and severe military conflicts as there are limitations to what geoeconomics tools can contribute for a country’s strategic objective, and that limitation leads to way for military actions.