Korea needs a command center for economic security

Hyperconnectivity, once the pathway to prosperity in the age of globalization, has become a weapon. Supply chains, trade, investment and finance now stand alongside ammunition, missiles and drones as core instruments of security.

Kim Byung-yeon

The author is a chair professor of economics at Seoul National University.

The era in which the economy and security could be treated as separate domains has ended. Today, the economy has become a weapon that serves both offensive and defensive purposes. The “weaponization of the economy” means that economic tools are now central instruments for controlling and constraining rivals at geopolitical fault lines. Countries that are vulnerable to economic attacks inevitably expose serious weaknesses in their national security as well.

Kim Jung-kwan, minister of Trade, Industry and Resources, right, speaks with Oh Hyun-joo, left, third deputy director of the National Security Office in charge of economic security, during the first meeting of the Resource Security Consultative Council at the Government Complex Seoul in Jongno District on Dec. 5. [NEWS1]

When Russia invaded Ukraine, Germany agonized over whether to supply weapons to Kyiv. What held Berlin back was its heavy reliance on Russian natural gas, which accounted for more than half of Germany’s consumption. Estimates suggested that a disruption in energy supplies could cause Germany’s GDP to contract by as much as 12 percent. Faced with that risk, Germany chose to provide helmets rather than offensive weapons. Excessive dependence on Russian energy effectively tied Germany’s hands.

The United States, by contrast, used economic tools with notable effectiveness during the Russia-Ukraine war. Anticipating the possibility of conflict, Washington had prepared a comprehensive sanctions strategy in advance. Immediately after the war began, the United States unleashed what amounted to rapid-fire, large-scale sanctions spanning trade, energy and finance. By identifying and targeting the Achilles’ heel of the Russian economy, this economic security strategy played a decisive role in thwarting Moscow’s plan to occupy Ukraine within weeks.

China is also actively weaponizing its economy. It controls more than 90 percent of global gallium production and over 60 percent of germanium output, both of which are essential for semiconductors and advanced weapons systems. By restricting exports of these two minerals, China has been able to blunt U.S. tariff pressure. It has also demanded detailed supply chain information from Western firms seeking access to rare earth materials, citing concerns over potential military use. The apparent aim is to map not only individual companies but also the strategic supply chains of rival countries for future leverage.

Much attention has been paid to military responses to a Taiwan contingency, including a blockade or invasion of the Taiwan Strait. Yet a recent estimate by a Japanese research institute suggests that China could reduce Taiwan’s GDP by 25 percent through comprehensive trade sanctions alone, without any military action. China’s own losses in such a scenario would amount to less than 1 percent of GDP. This indicates that an economic war without gunfire could represent China’s optimal strategy.

Korea is among the countries most vulnerable to economic security risks, yet progress in building its economic security capabilities has been slow. Japan created the post of minister for economic security in 2021, a role once held by Prime Minister Sanae Takaichi. Next year, Tokyo plans to establish an Economic Security Center under the Cabinet Office, placing it within the Research Institute of Economy, Trade and Industry. The center will focus on integrated research and policy development spanning the economy, technology, diplomacy, intelligence and the military, while also mapping supply chains for critical materials and coordinating policies across ministries. In mid-December, Japan hosted a global economic security forum, inviting experts from the United States, Europe and Australia, along with diplomats and business leaders. It has formed an economic security partnership with Britain and a consultative framework with Germany.

Korea, however, lacks a clear command center for economic security. Responsibilities are scattered across ministries, resulting in weak coherence. While the National Security Office has officials tasked with economic security, staffing levels are inadequate. What is needed are experts who combine deep knowledge of economics and geopolitics with an understanding of core technologies, supply chains and international cooperation. Such talent is difficult to find. The Foreign Ministry, the Ministry of Trade, Industry and Energy and the Ministry of Economy and Finance all have units related to economic security, but as their names suggest, these bodies operate in silos. In a world where supply chains, economics, technology, diplomacy and the military are tightly intertwined, it is doubtful that such fragmented structures can effectively safeguard economic security.

A Ukrainian member of an Azov Brigade drone team - callsign Sava 21 - launches a surveillance drone towards Russian positions on Feb. 4, amid the Russian war with Ukraine. [AFP/YONHAP]

Good research underpins effective economic security policy. Data-driven analysis is essential for real-time monitoring, early warning systems, preventive deterrence and postcrisis response. Yet Korea’s economic security framework lacks a dedicated research function. While policymakers may expect national research institutes to fill the gap, researchers already stretched by existing policy demands cannot easily divert significant resources to this new field. Government agencies, including customs authorities, are reluctant to share data due to concerns over confidentiality. Japan, by contrast, has agreed to provide data to researchers through interministerial coordination and is working with partners such as the United States and Taiwan on joint analysis of corporate data.

Today’s geopolitical tensions are increasingly fought as economic wars. Hyperconnectivity, once the pathway to prosperity in the age of globalization, has become a weapon. Supply chains, trade, investment and finance now stand alongside ammunition, missiles and drones as core instruments of security. The question is how prepared Korea truly is.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.