This year we witnessed geoeconomics trump geopolitics

THEORISTS of international relations and grand strategists around the world declared 'geopolitics redux' when Russia marched into Crimea in the spring of 2014. Russian President Vladimir Putin was castigated, or celebrated, for opening a new era of geopolitical competition on the Eurasian landmass. However, 2014 will be remembered as much for Russia's geopolitical initiative as it would be for the West's geoeconomic response. Given the sharp dip in oil prices, the squeeze on Russian big business and economic problems, with a sharply depreciating rouble, the geoeconomic cost of Putin's geopolitical move may yet prove salutary.

In the medium term, of course, the Russian economy will recover. It may even benefit from the rouble's depreciation, if Putin's domestic popularity holds in the face of economic difficulty at home. Russia does, after all, still have the trappings of a great power. But in the era of geoeconomics where the oil price or an unsustainable debt build-up can sap national power, Russia will have to find a geoeconomic route out of the geopolitical impasse it has got itself into. Russia is not the only major power to discover the power of geoeconomics. China entered 2014 imagining that its rising econom- other southeastern neighbours in the South China Sea came up against China's own economic interests in the region, nudging Beijing to take one step back after having taken two forward.

Of course, in geoeconomic terms, China is in a different league from Russia. While Russia depends almost entirely on energy to bankroll its power, China has a wider economic base. But China has created economic interdependencies, with its export-oriented industrial strategy, which act as a check on its aggressive political instincts. The 'assertive' China of 2012-13 projected a more benign face to the world in 2014 thanks to its own economic slowdown, on the one hand, and the assertion at home of business interests, on the

. While backing off on its geopolitical assertion, China chose to shift the focus to its geoeconomic clout, supporting new regional and multilateral initiatives in trade and finance and pushing the idea of a maritime silk route. Clearly, China has been cleverer than Russia.

While China's geopolitical clout may have been checked in the near term, her geoeconomic weight remains substantial. Even in South Asia, it is not China's military and maritime power that has altered the Asian balance of power as much as her geoeconomic heft, having emerged the most important trading partner of most Asian economies.

Turn to West Asia. For years, the regional powers have been indulging in geopolitical games. Finally, Saudi Arabia made a geoeconomic move by bringing the price of oil sharply down. A new game is on.

Further west, this century's biggest geoeconomic loser remains Europe. For all their pretension to great power status, ' Old Europe' - to use an Americanism of the Bush era - remains preoccupied with its own relative economic decline. Germany is the only major power of consequence in Europe. But Germany's geoeconomic dependence on Russia for energy, and on China for markets, has exposed its geopolitical limitations.

Where does all this leave the US? Sure, the shale oil business in the US has been hurt by the oil price drop and this would have consequences for the already weakened US financial system. But the dollar has bounced back and employment at home is rising and the US economy is sucking in capital once again. Six years after Lehmann and the trans-Atlantic financial crisis, while Europe remains weakened and troubled, the US has bounced back and demonstrated the capacity to rejuvenate.