EMILY FENG, HOST:
The Iran war has much of the world's oil supply stuck in the Persian Gulf as blockades by Iran and the U.S. keep the Strait of Hormuz effectively closed.
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UNIDENTIFIED PERSON: Warship 121. This is Sepah Navy Station. You must alter course and go back to the Indian Ocean immediately. If you don't obey my order, you will be targeted. Out.
FENG: The Iranian military occasionally broadcasts threats like this one, trying to deter any captain who wants to chance passing through that narrow channel. And as a result, fuel and fertilizer prices have skyrocketed. A good chunk of the global economy is being affected by that choke point, dispelling any notion that cargo vessels are free to navigate through international waters peacefully. But if that's the case, what does that mean for other waterways that are critical to global trade? Eyck Freymann is a Hoover fellow at Stanford University, and he's been thinking and writing about this question a lot, most recently in a piece for Foreign Affairs. Welcome, Eyck.
EYCK FREYMANN: Thanks so much for having me, Emily.
FENG: OK, so you write about choke points, economic choke points, in particular. Define that for me.
FREYMANN: The fact is in a globalized world, we have just taken for granted that goods and people can move freely through international waters and international airspace. But that isn't the historical norm. In fact, it's kind of an accident of history that's been created by overwhelming American military power. And in wars and conflicts in the past, it's not uncommon for one country to disrupt transits of goods and people through straits and other waterways to try to put economic pressure on their adversary.
FENG: Is the risk of an enemy pressing down on, say, the U.S.'s economic choke points - is that risk increasing? As you imagine, this is not a new invention in warfare, but is it happening more frequently now?
FREYMANN: There's a risk that it could, and there's both physical choke points and virtual choke points that come when the whole world economy is totally dependent on supply from one place. Taiwan is the most obvious of these. Taiwan makes 90% of the world's advanced semiconductors, but 99% of the NVIDIA GPUs that are training the next generation of cutting-edge AI models.
FENG: These are semiconductor chips.
FREYMANN: Yes. Never in world history has a technological revolution depended so much on a single product from a single place. And as a result, if these factories in Taiwan are disabled or destroyed, that could set the global economy back years.
FENG: We're all paying attention to Iran right now and the choke points there. Why think about China and Taiwan?
FREYMANN: Because if Iran took 20% of global oil supply offline, and just that threatened the United States with a recession and prompted a bitter political backlash, including in the president's own party, the dependence of our economy, of the world economy on Taiwan and the goods that travel on the sea routes around Taiwan is an order of magnitude more.
FENG: How have these vulnerabilities been built up? Is it through accident, or is it simply becoming easier for smaller powers to enact pain on bigger powers and leverage that asymmetry?
FREYMANN: In some cases, it's because there's just one company that has the technology to make something incredibly precise and complicated. But in other cases, countries deliberately pursue strategies to build choke point leverage over one another. The United States has done that with the dollar system. The fact that the world depends on dollars to do exchanges between banks gives the United States power to threaten other countries with financial sanctions, pushing them out of the dollar system. And China has been developing choke points of its own - most famously, critical minerals.
FENG: Now that we have a multipolar world, there are countries that are just as, perhaps more, powerful than the U.S. in certain aspects, like China, as you just mentioned. Is this a symptom of American hegemony perhaps slipping?
FREYMANN: I would frame it in another way, which is that in a hyper-globalized economy, if you can control economic choke points, then no amount of American military power can solve that problem for the American people. And China is - demonstrated this vividly in the last 12 months by weaponizing the export of these critical minerals to the entire world, which essentially threatens not only the United States, but everyone. If the United States or China ever decided to restrict the flow of semiconductors in and out of Taiwan, they would be causing a massive global financial and economic shock, and potentially most of the world would then line up on the other side to call for bringing those chips back online.
FENG: What can countries do to prepare then?
FREYMANN: It's a difficult thing because the institutions of the world economy were not set up to deal with problems like this. But I think what countries can do is form coalitions based on the principle of economic security and try to diversify their supply chains as much as possible, so they don't depend on any one country. And this is going to be a long-term process of reorganizing the world economy. It can't be done overnight or in a year or two.
FENG: Eyck Freymann is a Hoover fellow at Stanford University. His latest book is "Defending Taiwan: A Strategy To Prevent War With China." Thanks.
FREYMANN: Thanks, Emily.
(SOUNDBITE OF ALBERTO DROGUETT AND ALCYNOOS' "ATARAXIA") Transcript provided by NPR, Copyright NPR.
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