The US and its allies quickly slapped Russia with comprehensive sanctions following its February 2022 invasion of Ukraine. These sanctions pushed a fair share of skeptics to question the potential efficacy of a punitive strategy like this against Moscow.
But recent analysis has highlighted that sanctions are starting to cripple Russia’s economy. Although Vladimir Putin remains committed to waging war in Ukraine for the foreseeable future, the effect of the West’s sanctions may prevent how much longer Russian industries can keep pace with the demand to produce materials for the war effort.
Unfortunately for the Western bloc, the return of great power competition is not limited to Eastern Europe. China has continued ramping up its rhetoric about unifying the mainland with Taiwan, carrying out complex influence campaigns online, and, most recently, sending spy balloons into North American airspace.
Western governments may soon have to threaten sanctions against Beijing to reel in its overtly aggressive behavior. Some figures believe that Western sanctions on China – similar to those on Russia – will be equally effective. However, America and its allies shouldn’t expect their sanctions to pack as potent of a punch in deterring Beijing’s aggression or weakening its war effort if it indeed invades Taiwan. Sanctions on Russia have made the prospect of sanctions on China a high-cost endeavor – and some in the West may not be able to pay the price of implementing them.
On the surface, it’s easy to believe sanctions against China would be as – if not more effective – than sanctions against Russia when comparing the two economies. China is the world’s largest trading nation, whereas pre-war Russia only ranked 16th. In 2021, foreign direct and portfolio investment was six times higher in China than in Russia.
China is also much more reliant on the US dollar, holding the world’s largest foreign exchange reserves with $3.128 trillion. Potentially freezing these reserves – like how the US froze Russia’s pre-war $630.5 billion reserves – would considerably blow China’s economy and its potential to support a war. It would appear the Western order has considerable leverage on the Chinese economy.
But as Western sanctions on Russia have shown, for economic coercion to work, a coordinated effort must be made. The US has helped form a unified bloc to cut Russia off from valuable markets necessary to produce critical goods and maintain infrastructure. Russia is also missing out on lucrative oil and gas revenues due to Western import bans.
Since these sanctions are so well coordinated, Moscow has limited options to bypass them and continue doing business with other Western economies. This was one reason why initial Western sanctions after the 2014 annexation of Crimea failed – Russia found other willing Western partners with whom to continue doing business.
However, there’s been a catch to slowly breaking down the Russian economy – cohesively cutting off Russia has damaged some Western bloc economies. Analysts say that sanctions have likely increased disruptions in global supply chains, raised global commodity prices, and slowed overall global economic growth.
Russian energy cut-offs due to – and in retaliation for – sanctions have also helped push Europe into recession. Fed up with rising inflation, some Western citizens have taken to the streets to call for an end to Russian sanctions. Farther East, Japan and South Korea are facing higher prices and an increased risk of energy disruptions.
As a result, the US and its allies have lost a possible window of economic leverage on Beijing’s dependence on it. The West – already reliant on a tremendous amount of Chinese raw materials and consumer and commercial goods – can’t afford to do without these cheap commodities, given rising prices. The US and other allies have started onshoring critical businesses and industries, but properly decoupling the Western economy from China in the current global economy will be a long and complicated process.
The West’s economic split with Russia was a calculated risk, but states were far less dependent on Russia than they currently are on China. Western states are, therefore, unlikely to be able to stand as a united front when it comes to possible sanctions on China. Without this collaboration, sanctions have little chance of being effective.
For instance, if Washington struck Beijing with sanctions over a potential or ongoing invasion of Taiwan, European nations might not be able to bear the economic aftershocks of applying their own sanctions. China would then still have access to some of the largest Western markets, keeping its economy afloat to support its geopolitical aims.
Moving forward, Western policymakers must better coordinate how to approach China. A first step would be for officials to begin organizing future plans of action if they want sanctions to make any impact. Potential sanctions against a well-connected economy like China may not be as powerful as the current ones against Russia, but prior coordination can help establish a threshold for how far the West is willing and able to go as a unified bloc economically.
A second step would be for officials to better harmonize new policies aiming to reduce dependency on China. The American Inflation Reduction Act may help Washington mitigate its reliance on Beijing, but it may also damage European industries and the continent’s ability to become less reliant on China. To properly balance China and gain back lost financial leverage, the West must develop strategies that are mutually beneficial rather than transactional. Doing so will require greater consultation among Western allies when drafting their intended policies.
Policymakers should not expect to copy and paste their current sanction game plan vis-à-vis Russia when dealing with China. A strong economic deterrence might be a safer alternative than sending troops to defend Taiwan. But – as the current global economy stands – sanctions will not be a low-cost endeavor financially. The West must remain unified to make sanctions against China credible and effective, and preparation for doing so starts now.