Speaking at an event in Taipei on Sunday to mark Europe Day — the signing of the Schuman Declaration on May 9, 1950, which paved the way for the European Steel and Coal Community, a precursor organization to the EU — Minister of Foreign Affairs Joseph Wu (吳釗燮) said Taiwan hopes the world will sanction China like it is sanctioning Russia for its war on Ukraine, if Beijing were to invade Taiwan. Wu added that it was important for Taiwan to stand with others in denouncing the invasion, and sanctioning Russia and Belarus.
This raises two questions: First, are the sanctions against Russia actually having the desired effect and, second, would US-led sanctions against China, the world’s second-largest economy, be feasible, either as a deterrent or as a post-invasion coercive measure?
The answer to the first question is that it is probably too early to tell. Initial reports from Russia painted a picture of bleak economic devastation with chilling economic statistics, such as the ruble diving 40 percent against the US dollar, and forecasts that Russia’s economy would contract by 12 percent.
However, the Russian ruble has staged a dramatic recovery and is trading where it was prior to the invasion. One reason for this is massive state intervention, as well as gaping holes in the sanctions regime.
The US and European nations displayed unprecedented unity in agreeing to remove Russia from the SWIFT international payments system and stop buying Russian gas. Working in parallel, a plethora of international corporations from McDonald’s to BP to Uniqlo have pulled out of the Russian market. Yet far from being an “international pariah,” Russia is still trading freely with many nations, including the powerhouse economies of India and China, bringing a steady flow of foreign currency into Russia.
Some European nations, including Germany and Hungary, have dragged their feet over energy sanctions and are still buying significant quantities of Russian oil and gas. Even worse, the sanctions regime has pushed up global commodity prices, doubling oil and gas revenues for Moscow, while causing severe inflation and a cost-of-living crisis in the West.
Could sanctions work against China, given that its economy dwarfs that of Russia and is so deeply integrated in the global economy? Beijing is sufficiently concerned to have called a crisis meeting between Chinese regulators and domestic and foreign banks to discuss how they could protect China’s overseas assets from US-led sanctions, and Beijing has ordered officials to conduct “stress tests” of its economy, the Financial Times has reported.
Despite the apparent concern in Beijing, sanctions against China would look very different. Edward Fishman, former adviser to the US Department of State on economic sanctions, believes sanctions against China would be more limited, and focus on “frontier technologies” and “next-generation infrastructure,” instead of generalized economic disruption.
Were Washington to explicitly threaten sanctions as a deterrent against a Chinese invasion of Taiwan, Beijing would be able to counter with threats of its own. China has built a monopoly over rare-earth metals and minerals — used in everything from smartphones to the US military’s F-35 stealth jet — and produces more than 90 percent of the supply of penicillin for the US market, to name just two countersanctions with serious teeth.
Threats and counterthreats of economic sanctions between the US and China might evolve into a new form of economic mutually assured self-destruction: The prospect would be so devastating to the entire global economic system that neither Washington nor Beijing would ever contemplate making the first move for fear of triggering an unstoppable cascade effect. Economic sanctions might have their place, but they are no substitute for robust military deterrence.
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