“The war is continuation of policy by other means,” – Von Clausewitz On the third day of the Ukraine war, western governments declared against Russia, the most far-reaching and punishing set of financial and economic sanctions ever levelled at an adversary, especially directed against the Russian Central Bank. This, ‘Thermo-financial’ strategy conceptualized by Yellen, ex-chair of the US Federal Reserve, and Draghi, a former head of the European Central Bank, veterans of the 2008-09 financial crisis to the euro crisis, was directed against a large part of Moscow’s $643bn of foreign currency reserves with intention to significantly damage the Russian economy. This was effectively declaring financial war on Russia. “This is full shock and awe, It’s about as aggressive an unplugging of the Russian financial and commercial system as you can imagine,” says Juan Zarate, a former senior White House official who helped devise the financial sanctions America has developed over the past 20 years. The term weaponization of finance refers to the foreign policy strategy of using incentives (access to capital markets) and penalties (varied types of sanctions) as tools of coercive diplomacy. This is the first time application of ‘The strategy of weaponisation of the US dollar and other Western currencies’, to punish their adversaries. The strategic approach to conflict has been sharpened and tested at tactical and operational levels against countries like Pakistan, Iran, Iraq etc. for more than three decades. Financial sanctions are increasingly becoming the national security policy of choice. The weaponization of finance refers to the foreign policy strategy of using incentives and penalties as tools of coercive diplomacy. The weaponisation of finance has profound implications for the future of international politics and economics. Economic power, a decisive element of international power, in sync with state monetary policy is the bedrock of refinement of military capacities (no security per, in the case of Pakistan?). Globalisation growth and reciprocal interdependencies were long considered as a barrier to wars. However, the value chain vulnerabilities have increased the susceptibility of many countries’ economic intimidation. The tendency, which has been used as a tactical weapon against weak countries since the late sixties, is now used against powerful countries as well. Technological (artificial intelligence, cloud computing, quantum internet, 5G) asymmetries have fueled the economic imbalance. Foreign direct investment increasingly becomes a tool of political strategy and inter-state conflicts are far less a question of military action. Events like Russia’s violent takeover of Crimea, the invasion of Ukraine or the war in Syria are now the exception and not the rule. By contrast, we are seeing a sharp increase in countries’ deployment of economic and financial instruments to strengthen their power base, including outside their territory. US dollar ostensibly derives financial sanctions with America’s deepest capital markets, and US Treasury bonds act as a backstop to the global financial system. As a result, it is very hard for financial institutions, central banks and even many companies to operate without the US dollar and the American financial system. Taking into account the effect of the euro, sterling, the yen and the Swiss franc, and the impact of such sanctions is even more chilling. Economic sanctions are a new kind of economic statecraft with the power to inflict damage to military might. 9/11 ensued a new Global financial warfare subtly with the aim to “starve the terrorists of funding” as the Patriot Act gave sweeping powers to the Treasury Department to sever any financial institution involved in money laundering. Treasury officials with the help of the US and local security apparatus of countries like Pakistan, Egypt and Yamen went on a financial rampage gaining access to data from Swift, the Belgium-based switchboard for international financial transactions, expanding the network of intelligence on money moving around the world. The key component of this financial blitzkrieg is creating strategic financial paralysis at the state level, palsying central banks, tasked to defend currency or pay for essential imports and finally, creating shock, fear and incoherence at the individual/market and business levels. Pakistan, with coherent strategic economic depth, has consistently been managed by desk and rostrum accountants/teachers for many decades fully compliant with the international financial offensive. Our policymakers, on all sides of the state mosaic, have failed to realize the economic neighbourhood interdependence and technobilization (new form of Globalization). The state needs to fundamentally depart from colonial economic order and transcend into growth-centric, globe-assimilating policies. Unfortunately, the state still seems to have frozen 20th-century security and economic paradigms. Ominously for Pakistan, financial sanctions exponent Daleep Singh, a former Fed official, now deputy national security adviser for international economics at the White House, is the key architect. Thus, DNA will accentuate the problem. There is a common belief that AIIB replacing IMF and replacement of SWIFT with the Sino-Russian system will restore the global economic equilibrium, remember, Pakistan and China signed a mutual Yuan Rupee exchange as early as 2007, however, Chinese companies’ love for dollars is further compounding the problem for Pakistan. It is a complex and multifaceted topic and requires a deeper understanding of the roles and functions of these institutions, as well as the implications of such replacements on the global economic equilibrium. The IMF aims to promote global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, reduce poverty around the world, provide financial assistance to member countries facing balance of payments problems and offer policy advice and technical assistance. Also serves as a forum for member countries to discuss and coordinate policies on global economic issues. The idea that AIIB could replace the IMF stems from the perception that emerging economies, particularly those in Asia, are seeking greater representation and influence in global economic governance. AIIB focuses on financing infrastructure projects in Asia. It was seen by some as an alternative to existing institutions, which have been criticized for their perceived Western dominance. However, both institutions aim to promote economic development and stability, they have different approaches and areas of focus. IMF-driven policies in Pakistan have never been completely successful, as these were mostly led by accountants, Bankers, and Western-educated individuals, not like developmental finance experts like Ghulam Ishaq and Sartaj Aziz. PS: Part 2 will cover Pakistani vulnerabilities and mitigation strategies. The writer is a retired military officer with a forte in developmental finance. He is a cohort of the London School of Economics and Political Science, HEC Paris and Stern Business School.