De-risking

Working Definition

De-risking is a state policy of selectively reducing strategic economic dependence on a trading partner capable of using that dependence as an instrument of political coercion, while preserving the bulk of non-sensitive commercial exchange. Operationally, it proceeds in three steps: identifying critical supply-chain chokepoints (such as critical raw materials, advanced semiconductors, active pharmaceutical ingredients, and telecommunications infrastructure), diversifying suppliers or building domestic capacity at those nodes, and restricting the outbound transfer of dual-use technologies in the opposite direction. It differs from full-scale economic decoupling in both scope and diplomatic register: rather than severing trade wholesale, it prunes specific vulnerabilities. In popular shorthand it often means simply “less China in the supply chain,” but in its precise analytical sense—building on Robert Keohane and Joseph Nye's classic distinction—it is an exercise in separating mere sensitivity (short-term price fluctuations that markets can absorb) from structural vulnerability (asymmetric exposure to strategic blackmail).

Genesis and Global Lineage

The term had an earlier technical life in banking compliance, where it described financial institutions terminating correspondent relationships with clients or jurisdictions deemed to pose high money-laundering risks; it entered the vocabulary of geoeconomics in the spring of 2023. European Commission President Ursula von der Leyen coined the geopolitical usage on March 30, 2023, in a speech on EU–China relations at the Mercator Institute for China Studies and the European Policy Centre, advancing the maxim “de-risk – not de-couple” and outlining four pillars of economic security. On April 27, 2023, US National Security Advisor Jake Sullivan adopted the exact phrase in his landmark address at the Brookings Institution, explicitly crediting von der Leyen; on May 20, 2023, the G7 leaders' communiqué in Hiroshima enshrined “de-risking, not decoupling” as official Western doctrine, followed in June 2023 by the European Economic Security Strategy. The underlying intellectual lineage, however, stretches back eight decades: in 1945 Albert O. Hirschman demonstrated how asymmetric trade grants the larger power a coercive “influence effect”; in 1977 Keohane and Nye distinguished sensitivity from vulnerability in interdependent systems; and in 2019 Henry Farrell and Abraham Newman showed how global hub-and-spoke networks allow states controlling central nodes to exercise surveillance (“panopticon”) and cutoff (“chokepoint”) power over rivals (weaponized interdependence). Since 2023, the term has been partly co-opted by corporate boards as a polite euphemism for routine supply-chain relocation and dismissed by skeptics as a diplomatic fig leaf for slow-motion decoupling.

Central European Lineage

Central and Eastern Europe connects to the concept through two historical experiences: one a recently completed strategic sequence, the other the classic interwar case that inspired the theory of trade coercion. First, the Baltic states executed in practice what Brussels and Washington only later named in doctrine—after years in which Poland and the Baltic states had warned Western Europe against the strategic vulnerability of the Russian–German Nord Stream pipelines. Lithuania, Latvia, and Estonia halted imports of Russian pipeline gas in April 2022, Lithuania banned Russian liquefied natural gas in October 2023, and on February 8–9, 2025, all three countries disconnected from the Soviet-era BRELL (Belarus–Russia–Estonia–Latvia–Lithuania) synchronous electricity ring and synchronized their grids with Continental Europe. A commentary by the Warsaw-based Centre for Eastern Studies (OSW) in April 2025 explicitly analyzed this sequence as “Baltic de-risking”—a completed, textbook elimination of vulnerability to an aggressive supplier, initiated back in 2014 when Lithuania leased the Independence LNG terminal in Klaipėda. Second, the theoretical bedrock of de-risking grew out of 1930s Southeastern and Central Europe: Albert O. Hirschman's National Power and the Structure of Foreign Trade (1945) modeled asymmetric trade coercion on Nazi Germany's bilateral clearing agreements with Hungary, Romania, Bulgaria, and Yugoslavia, through which Berlin locked smaller agrarian states into dependence on a single buyer (though the exact empirical breakdown in Hirschman's tables and its citation link to Farrell and Newman remain marked for primary-text verification).

Why Now

The doctrine emerged from a rapid succession of shocks between 2018 and 2023. The US–China tariff war from 2018 and the 2019 export blacklist against Huawei showed that technology supply chains could become weapons overnight. In 2020, the COVID-19 pandemic exposed reliance on single-country hubs for masks, chemical precursors, and chips. Beginning in February 2022, Russia weaponized natural gas deliveries to blackmail European governments, while Western allies weaponized SWIFT and central-bank reserve freezes against Moscow—both sides playing out Farrell and Newman's script. Sweeping US export controls on advanced AI chips and lithography tools to China in October 2022, followed by Beijing's export restrictions on gallium, germanium, graphite (2023), and rare-earth processing, completed the picture. The 2023 slogan “de-risking” named a middle path: ring-fencing critical bottlenecks (“a small yard with a high fence”) without blowing up bilateral trade worth hundreds of billions of euros, even as EU member states—above all Germany—clashed over how wide that yard should be.

Explanatory Power

De-risking shows that the danger of economic dependence is measured not by a country's aggregate share of foreign trade, but by the topology of supply-chain networks and the cost of switching under duress. First, while the EU imports roughly comparable total values of goods from China and the US, only in specific upstream bottlenecks—rare-earth permanent magnets, solar wafers, and antibiotic precursors—does Europe lack viable alternatives; de-risking directs policy attention to those chokepoints rather than the headline trade deficit. Second, it explains why Taiwan is a single point of failure for the world economy despite its modest share of global GDP: TSMC fabricates the vast majority of the world's most advanced logic semiconductors. Third, it reframes Europe's pre-2022 energy relationship with Russia: the decisive question was never “what percentage of gas comes from Gazprom,” but “who can cut off whom at what switching cost.” Because Lithuania asked that question in 2014 and built the Klaipėda LNG terminal, it could sever Russian gas imports in April 2022 without economic collapse.

Axes of Debate

Underappreciated Angle

Public debate in Europe and North America treats de-risking almost exclusively as a strategy directed at China and Russia, yet the world's most potent architecture of weaponized interdependence belongs to the United States: dollar clearing, SWIFT governance, hyperscale cloud infrastructure, and foundational IP in semiconductor design. As Farrell and Newman show in Underground Empire (2023), Washington perfected turning global hubs into instruments of extraterritorial coercion long before Beijing did. Seen from Central Europe, de-risking therefore cuts in two directions: it is an urgent imperative to eliminate critical dependencies on eastern autocracies, but it also raises the question of how deeply European states can depend on single-source American digital and defense ecosystems when Washington's trade and alliance policies can swing every four years. The transatlantic tariff disputes of 2025–2026 turned that theoretical question into a practical dilemma: a concept forged to manage an adversary turns out to be an equally sharp diagnostic tool for examining one's own alliance.