On Monday, the Senate Finance Committee passed the first stage of a bill that would impose sanctions on non-U.S. businesses that were helping build the Nord Stream 2 pipeline from Russia to Western Europe. Like many other sanction measures, the bill relies on U.S. influence over the entire global financial system. A letter from Sens. Ted Cruz (R-Tex.) and Ron Johnson (R-Wis.) threatened that Allseas, a company helping to build the pipeline, would be blocked from any financial transactions with the United States, “destroy[ing] the future financial viability of [the] company.”

How can the United States do this? The answer is that since 2001, America has increasingly turned global economic and financial networks into weapons that can be used against adversaries. As we showed in earlier research, financial networks such as the “dollar clearing system” and the SWIFT messaging service, which provide foundations for the global financial system, have been used by the United States to gather intelligence and to isolate entire economies, such as Iran, from the global financial system. Control of these networks allows the United States to issue “secondary sanctions” against countries, businesses or individuals that it wants to target, obliging non-U.S. actors to adhere to the sanctions or risk substantial penalties.

Now, these tools are leading to backlash and reaction. As we discuss in a new article in Foreign Affairs, other countries are beginning to think about how they can best respond: by threatening retaliation, by creating their own networks, or by insulating themselves from U.S. pressure. Here’s what is going on.

Other states are unhappy with U.S. tactics

Although German Chancellor Angela Merkel is not threatening retaliation, other German politicians are less sanguine. Key lawmakers responded fiercely to U.S. legislation that would impose sanctions on the Nord Stream 2 pipeline that transports gas from Russia to Europe. German Foreign Minister Heiko Maas said, “We are opposed in principle to interventions from abroad, and to extraterritorial sanctions.” German members of parliament are claiming the sanctions are a “hostile act” and are calling for “countermeasures.” These calls feed into a wider European debate. A widely read report published this year by the European Council on Foreign Relations described U.S. use of financial networks as a “critical challenge” for Europe and suggested Europe should consider developing tools that could be used to retaliate or to deter the United States from using these sanctions in the future.

Rivals such as China are also worried and angry. This week, a provisional first stage trade deal was reached between the United States and China. However, as Julian Gewirtz reported in Politico, Chinese policy intellectuals don’t see any prospect of happy relations between the United States and China. Instead, they see a “financial war” emerging. Gewirtz describes how the liberal economist and former finance minister Lou Jiwei foretells the “next step in the frictions between China and the United States is a financial war. … The U.S. has been hijacked by nationalism and populism, so will do everything in its power to use bullying measures [and] long-arm jurisdiction.” Other Chinese policy experts are making similarly dire prophecies. The problem, as they see it, is that U.S. efforts to weaponize the global financial system are undermining Chinese security.

These states are considering their options

Countries that are unhappy with U.S. domination have three major options. First, they can try to develop their own networks. As Gewirtz notes, there is a lot of discussion in China about creating alternatives to SWIFT and dollar clearing, although it is not clear whether China can do this. Russia, too, is trying to build up an alternative international payment system and has gotten interest from other countries, including NATO member Turkey. Both China and Russia are intrigued by the possibilities of blockchain-based systems of financial exchange. Even Europe is trying to build a limited channel to allow economic exchange with Iran. However, building these networks is hard, and getting other states to commit to them, and private actors to use them, is even harder.

A second alternative is retaliation and deterrence. The United States may be less quick to weaponize global networks if it fears others will retaliate against it. The difficulty, however, is that no other country enjoys the same kind of global network control that the United States has. What this means is their economic retaliation is limited to weaponizing their own domestic markets rather than global networks.

China, for example, has often used market access as a means to deter other states; it has just quietly threatened Germany, for example, suggesting it might impose import restrictions on German cars, if Germany discriminates against the Chinese telecommunications provider Huawei. The European Union may consider changing its rules to allow similar measures if the United States targets its relationship with Russia, for example by imposing licensing requirements on U.S. financial firms that want to operate in Europe, and withdrawing their licenses if they cooperate with U.S. sanctions policy.

The difficulty is that this kind of threat is only credible if it comes from countries with big internal markets, which U.S. firms want access to. Other countries may be forced to resort to blunter threats to counter U.S. pressure. It is possible, for example, that Iranian-sponsored attacks on oil refineries and shipping are intended to communicate a threat to the U.S. and its allies.

A third possibility is simply to hunker down and build up defenses. Russia has spent the past couple years building up financial reserves that do not depend on the U.S. dollar and creating internal financial communications systems that limit its reliance on SWIFT. China is building up a domestic semiconductor industry to ensure its firms cannot be attacked through their reliance on U.S.-based technologies. Over the next several years, countries are likely to insulate themselves more from the global financial and technology economies than in the past.

We live in a world of ‘chained interdependence’

As our Foreign Affairs article suggests, countries are beginning to wake up to the strategic challenges of global networks. This is creating a backlash against the United States. It is not clear how the United States is going to respond to this backlash, but however it does respond, it is likely to create new dynamics of reaction and counterreaction.

This is not, as some commentators suggest, likely to lead to a new Cold War, in which adversaries’ economies are separated by a global wall. What is more likely is a world of “chained interdependence,” where countries find themselves bound together by networks and supply chains that combine continued economic benefits with critical security vulnerabilities. Mapping out how security and economic questions intersect in a world of global networks presents a huge research challenge. We don’t have the systematic concepts, or the data, to have more than a very rough understanding of what is going on.

Abraham Newman is professor in the Edmund A. Walsh School of Foreign Service and Government Department at Georgetown University. He is also the director of the Mortara Center for International Studies.