Economic Statecraft: How Finance Shapes Great Power Competition & the AI Boom
Contemporary great power competition is increasingly defined by control over strategic “gateways” of the international system – regions where geopolitical influence, energy flows, maritime routes, military positioning, and financial networks converge. This shift, evident as of March 15, 2026, represents a move away from direct confrontation toward a distributed competition unfolding across multiple regions simultaneously, according to analysis of the evolving global landscape.
The ability to mobilize and direct capital across critical industries – defense, infrastructure, manufacturing, and technology – is becoming a defining instrument of contemporary economic statecraft. Governments are increasingly focused on aligning national priorities with private investment, leading to the emergence of new financial tools and strategies. This new approach operates across three interconnected layers: finance, physical infrastructure, and the technology that relies on both.
The generative AI infrastructure boom exemplifies this interplay. The demand for power generation, data centers, digital connectivity, and critical minerals is accelerating, requiring substantial and patient capital investment. According to Nvidia’s CEO, the cost of a one-gigawatt AI data center can range from $35 to $60 billion. This infrastructure is inherently global, with many key inputs originating in emerging markets. The Indo-Pacific region’s data center market is forecast to grow to $53.58 billion by 2028, driven by AI-related commodity and energy demand, according to Marsh.
This situation underscores the importance of organizing capital, energy supply, and infrastructure to shape the scaling and value creation of the AI economy. For the United States and its allies, the strategic task is to ensure that the finance, physical assets, and supply chains supporting this technology are built within trusted economic networks.
Finance is emerging as the central mechanism for coordinating efforts on critical industries. Governments are deploying investment vehicles, financing platforms, and policy incentives to reduce early risk and attract private capital. The U.S. Department of Defense’s Office of Strategic Capital, established in 2022, currently deploys approximately $1.2 billion through direct loans and fund financing. The United Kingdom’s National Security Strategic Investment Fund, launched in 2018, co-invests alongside commercial funds and provides market intelligence. Australia recently announced a venture-backed defense vehicle with up to $350 million targeting cyber, AI, quantum, electronic warfare, and undersea systems.
At the multinational level, the NATO Innovation Fund, launched in 2022 with approximately $1.2 billion from 24 allies, represents the highest benchmark for regional capital aggregation. These investment vehicles share core features: deploying public capital to crowd in private investment, absorbing early-stage risk, and limiting investment to strengthen national or allied capacity.
However, these vehicles face limitations. Government balance sheets are finite, and risk tolerance can be low. Australia’s National Reconstruction Fund has experienced challenges navigating risk culture and deploying capital quickly. Despite these hurdles, finance is becoming a central component of allied economic statecraft, with public money setting direction and private capital following where returns are credible.
Funding critical industries requires the full capital stack – venture capital, development finance institutions, sovereign wealth funds, and pension systems – working together across the entire supply chain. Capital-rich markets, such as those in the Middle East, demonstrate how large pools of capital translate into economic influence. Investment institutions like Mubadala, the Abu Dhabi Investment Authority, Saudi Arabia’s Public Investment Fund, and the Qatar Investment Authority play a leading role in funding critical industries globally.
However, reliance on external financing for strategic industries risks shifting economic benefit and strategic influence to potentially unfriendly actors. Significant pools of capital also reside within allied economies. Australia’s pension system manages more than $2.5 trillion, even as Japan’s Government Pension Investment Fund represents an even larger pool. Private finance is also increasingly recognizing economic security as an investment category, as demonstrated by JP Morgan’s $1.5 trillion commitment over 10 years to advanced manufacturing, defense, energy, and frontier technologies.
The challenge lies in organizing this capital stack quickly enough to direct it toward shared strategic priorities. To meet this challenge, governments and industry should focus on lowering the cost of capital, enabling priority projects, aggregating demand across allies, building financing platforms, and improving government coordination.
New legislation in the United States allowing businesses to immediately deduct the full cost of eligible property improvements can reduce the cost of capital. Governments should also create shared priority lists across allies to signal investment focus, building on existing national models like Australia’s Infrastructure Priority List and the United Kingdom’s Planning and Infrastructure Bill. The Trilateral Infrastructure Partnership, launched by the United States, Japan, and Australia, offers a precedent, though it struggled to align investment mandates and generate a clear project pipeline.
Allies are beginning to experiment with mechanisms to combine project finance, supply chain coordination, and pooled demand, particularly in the critical minerals sector. Initiatives like the Forum on Resource Geostrategic Engagement and the Quad Critical Minerals Initiative reflect a growing recognition of the require for multilateral coordination. Governments should also consider establishing dedicated financing platforms, such as a potential Indo-Pacific critical industries fund, to align capital and strategic priorities.
Finally, each government should establish a special envoy office with authority to coordinate critical industries policy across government and industry. This office would serve as a coordination mechanism between agencies, countries, and the private sector. Governments should develop shared metrics to account for the wider strategic value created by infrastructure investments.
The disposition of the United States will inevitably shape the pace and form of this coordination. When Washington is an active lead partner, allies can move further and faster. However, even when U.S. Posture is more transactional, the case for allies building a more resilient financing architecture of their own becomes stronger. Emerging economic statecraft is about the sustained organization of capital across critical industries, building resilience and long-term industrial capacity.