China Articles - March 6, 2022
Friends,
Unfortunately, we live in interesting times.
This week’s issue focuses on the implications of the Sino-Russian entente. The first piece is from Robert Gates, the former Secretary of Defense for both Presidents George W. Bush and Barack Obama. Gates calls for a complete overhaul of the U.S. national security strategy to account for the fact that we face two great powers, often acting in unison, to overthrow the international order and create a system that suits them.
Anne Applebaum and Orville Schell make similar arguments in their pieces this week, along with multiple OpEds and Editorials in the opinion section. Martin Wolf in the Financial Times sees a new conflict between tyranny (PRC and Russia) and democracy and that “economic effects will follow geopolitics” (#59). The overwhelming theme is that we can no longer afford to pick between Asia and Europe, but to think and act holistically given our globalized world.
I recommend listening to Peter Robinson’s interview of Professor Stephen Kotkin in early February on the podcast “Uncommon Knowledge” (#2). The modern Russian history scholar provides insight into the motivations of the Chinese Communist Party (of note, Robinson invited Kotkin back for another interview on March 4th… listen to that one as well).
As these events unfold, I’ve noticed an interesting trend within the business and investor communities: some are beginning to realize that there may be significant risk around perpetuating commercial and economic dependencies with the PRC. Days before Russia’s invasion of Ukraine, the Keil Institute for the World Economy, a German think tank, released its report on the threats to Germany’s automobile industry given its dependence on the PRC (#5).
This week, the Conference Board, a nonprofit that promotes the interests of Multinational Corporations (MNCs), issued a fascinating report (#8) on the risks MNCs face with the growing Sino-Russian relationship and the invasion of Ukraine (which, interestingly the Conference Board refers to as “the Ukraine Situation”). The Conference Board recommends that strategists in Multinational Corporations develop contingency plans and closely monitor for an openly adversarial relationship between the PRC and democracies in Asia, North America and Europe (as if the evidence for that is not already apparent). This is quite a turn-around for the Conference Board given its decades of promoting closer ties with the PRC and downplaying potential risks.
Lastly, I want to highlight two reports that I helped author that were released this week. The first was “China’s Digital Ambitions: A Global Strategy to Supplant the Liberal Order” from the National Bureau of Asian Research (#6). The second was “Digital Currencies: The US, China, and the World at a Crossroads” from the Hoover Institution (#7). Both look at interrelated initiatives by the PRC to “re-wire” the international system in order to advantage the Chinese Communist Party.
Thanks for reading!
Matt
MUST READ
1. We need a more realistic strategy for the post-Cold War era
Robert Gates, Former Secretary of Defense, Washington Post, March 3, 2022
For the first time since World War II, the United States faces powerful, aggressive adversaries in Europe and Asia seeking to recover past glory along with claimed territories and spheres of influence. All in defiance of an international order largely shaped by the United States that has kept the peace among great powers for seven decades. The Russian and Chinese challenge to this peaceful order has been developing for a number of years.
…
A new American strategy must recognize that we face a global struggle of indeterminate duration against two great powers that share authoritarianism at home and hostility to the United States. They are challenging us not only militarily but also in their use of other instruments of power — development assistance, strategic communications, covert and other influence operations, and advances in cyber- and other technologies.
We cannot pretend any longer that a national security focus primarily on China will protect our political, economic and security interests. China, to be sure, remains the principal long-term threat. But, as we have seen in Ukraine, a reckless, risk-taking dictator in Russia (or elsewhere) can be every bit as much a challenge to our interests and our security. We need a new strategy to deal effectively with adversaries in both Asia and Europe — adversaries with global reach.
A new strategy addressing global challenges to America — and all democracies — in the 21st century requires significant changes to U.S. national security structures that are, for the most part, a legacy of the late 1940s. If we can avoid war with Russia and China, our rivalry with them will be waged using nonmilitary instruments of power — the same kind of instruments that played a significant role in winning the Cold War: diplomacy, development assistance, strategic communications, science and technology, ideology, nationalism, and more.
2. VIDEO – 5 Questions for Stephen Kotkin
Peter Robinson and Stephen Kotkin, Uncommon Knowledge, February 4, 2022
Or the Podcast:
AUDIO – 5 Questions for Stephen Kotkin
Peter Robinson and Stephen Kotkin, Uncommon Knowledge, February 4, 2022
Peter Robinson interviews Stephen Kotkin, professor of history at Princeton and author of books on modern Russian history. Robinson poses five questions to Dr. Kotkin: what Xi Jinping, the president of China believes; what Vladimir Putin believes; whether nuclear weapons are a deterrent in the 21st century; the chances of another American renewal; and Kotkin’s rational basis for loving the United States. It’s a fascinating conversation that delves deep into one of the country’s brightest minds.
3. Putin and Xi's Imperium of Grievance
Orville Schell, Project Syndicate, March 1, 2022
The scholar Orville Schell writes that with the Russian invasion of Ukraine, there is no longer any doubt that the halcyon days of Western-led globalization are over, not just economically but also politically and culturally. The narrative of victimization that fuels Russian and Chinese nationalism will continue to prevail over the niceties of the post-Cold War era.
4. The Impossible Suddenly Became Possible
Anne Applebaum, The Atlantic, March 2, 2022
The writer Anne Applebaum writes about how the Russian invasion of Ukraine appears increasingly to be a historical pivot point, in which options that had once been impossible are now possible in a geopolitical sense.
5. China business could become a problem for German companies
Rolf J. Langhammer, Keil Institute for the World Economy, February 21, 2022
The German think tank Kiel Institute examines the increasing risks for German companies which are overly invested in and dependent upon the People’s Republic of China. “German companies are on the path to critical dependence on the goodwill of the Chinese leadership. They serve China's geopolitical claim to power when they transfer their know-how to the country, and they can be squeezed out by domestic firms,” writes the author Rolf J. Langhammer.
6. China’s Digital Ambitions: A Global Strategy to Supplant the Liberal Order
Emily de La Bruyere, Doug Strub and Jonathan Marek, National Bureau of Asian Research, March 1, 2022
This report from NBR’s Center for Innovation, Trade, and Strategy examines China’s strategic approach to the digital revolution, assesses the implications for the international order, and provides a roadmap for a multilateral response by the United States and its allies and partners.
7. Digital Currencies: The US, China, and the World at a Crossroads
Darrell Duffie and Elizabeth Economy, Hoover Institution, March 4, 2022
Central bank digital currencies have taken flight globally, and China is boldly leading the way. The Hoover Institution brought together distinguished experts in national security, finance, economics, central banking, technology policy, and computer science to examine this development and propose a pathway toward revitalizing US financial leadership on the international stage in the digital age.
AUTHORITARIANISM
8. Sino-Russian “Friendship” and the Ukraine Situation – A Slippery Slope
The Conference Board, March 3, 2022
Over-supporting Russia’s Ukraine position risks greatly exacerbating ongoing US-China/Sino-western tensions and inviting tougher restrictions on China trade, investment, and commerce from the US and Europe. MNCs and foreign investors in China are keen to understand the potential impacts of the Ukraine situation on business in China. This Commentary frames the current situation and outlines the key guideposts members should be monitoring to gauge risks.
Insights for What’s Ahead:
As US-China relations have deteriorated, Sino-Russian relations have expanded to encompass an array of new trade and security partnerships. These partnerships are being put to the test by Russia’s war on Ukraine.
China’s support for Russia on Ukraine, tacit or overt, runs the risk of repositioning China as an adversary to western powers, as opposed to the prevailing “strategic competitor” view most policy makers in the US and Europe have today.
This shift is unlikely given China’s penchant for pragmatism, preservation of self-interest, and internal and external stability; but it is not implausible that China could prioritize ideological and geostrategic interests over economics given China’s many recent policy and ideological redirections.
If such a repositioning happens, it would likely produce the consensus in Washington, Brussels, Berlin and elsewhere needed to advance tougher, possibly more collective, policies on Sino-western trade and investment, and harder sanctions on Chinese human rights issues. Sino-Western trade would effectively become more restrictive and Sino-western bifurcation and decoupling trends would accelerate. Contingency plans are warranted for this scenario.
9. China Asked Russia to Delay Ukraine War Until After Olympics, U.S. Officials Say
Edward Wong and Julian Barnes, New York Times, March 2, 2022
A Western intelligence report said senior Chinese officials told senior Russian officials in early February not to invade Ukraine before the end of the Winter Olympics in Beijing, according to senior Biden administration officials and a European official.
10. Why the Chinese Internet Is Cheering Russia’s Invasion
Li Yuan, New York Times, February 27, 2022
If President Vladimir V. Putin is looking for international support and approval for his invasion of Ukraine, he can turn to the Chinese internet.
Its users have called him “Putin the Great,” “the best legacy of the former Soviet Union” and “the greatest strategist of this century.” They have chastised Russians who protested against the war, saying they had been brainwashed by the United States.
Mr. Putin’s speech on Thursday, which essentially portrayed the conflict as one waged against the West, won loud cheers on Chinese social media. Many people said they were moved to tears. “If I were Russian, Putin would be my faith, my light,” wrote @jinyujiyiliangxiaokou, a user of the Twitter-like platform Weibo.
As the world overwhelmingly condemns Russia’s invasion of Ukraine, the Chinese internet, for the most part, is pro-Russia, pro-war and pro-Putin.
11. How China Embraces Russian Propaganda and Its Version of the War
Li Yuan, New York Times, March 4, 2022
Hours after Russia invaded Ukraine on Feb. 24, the Chinese Communist Party tabloid, Global Times, posted a video saying that a large number of Ukrainian soldiers had laid down their arms. Its source: the Russian state-controlled television network, RT.
Two days later, China’s state broadcaster Central Television Station (CCTV) flashed a breaking news alert, quoting Russia’s parliamentary speaker, that President Volodymyr Zelensky of Ukraine had fled Kyiv. CCTV then created a related hashtag on the Twitter-like platform Weibo that was viewed 510 million times and used by 163 media outlets in the country.
On Feb. 28, as Russia became an international pariah, the Russian state-owned news agency Sputnik shared a message of strength with its 11 million Weibo followers. The Russian foreign ministry spokeswoman, Sputnik said, said Russia still had friends in the world, especially “a real giant” like China.
“Add oil, Russia,” Sputnik’s Weibo follower @fengyiqing cheered on, using a Chinese expression of support. “All the people in the world who love justice are friends of Russia.”
YouTube, February 28, 2022
13. China-Russia relations: Before the invasion of Ukraine
Charles Parton, Council on Geostrategy, March 2, 2022
14. After the invasion: The future of China-Russia relations
Charles Parton, Council on Geostrategy, March 3, 2022
15. How China is dealing with misinformation about Ukraine
Shen Lu, Protocol China, March 2, 2022
As soon as news broke that Russia had invaded Ukraine, warmongers, ultranationalists and incels in China swarmed to social media. They spread misinformation, cheered for the war as well as the possibility of taking in female refugees from Ukraine and were gleeful that this could be a lesson for Taiwan.
16. Will China fund Moscow’s war chest as Western sanctions bite?
Stuart Lau, Politico, February 28, 2022
Just weeks after the two countries signed a "no limits" partnership agreement, China now has no choice but to recalibrate its position on bilateral trade and macroeconomics with Moscow, after President Vladimir Putin launched an unprovoked war on Ukraine.
While Beijing still wants to count on Moscow as a long-term strategic partner to fend off America's global influence, it will no doubt be wary of the international reaction if it opts for measures that could be interpreted as an endorsement of Putin's aggression, according to experts.
17. We won’t block trade with Russia, China insists
Didi Tang, Times of London, February 28, 2022
Mengyu Dong, Twiiter, February 26, 2022
Mengyu Dong, Twitter, February 26, 2022
Mengyu Dong, Twitter, February 26, 2022
21. TWEET – Jin Xing, China's most famous transgender dancer and talk show host, is currently banned from posting on Weibo after she spoke up for Ukraine. more on Jin Xing: https://nytimes.com/2021/07/16/world/asia/china-transgender-jin-xing.html
Mengyu Dong, March 2, 2022
22. Ex-chief of Hong Kong Bar Assoc. reportedly meets with national security police
Hong Kong Free Press, March 1, 2022
23. Ex-Bar Association chairman leaves Hong Kong for UK after meeting with police
Clifford Lo and Chris Lau, South China Morning Post, March 2, 2022
Paul Harris flew out for the United Kingdom by way of Turkey at around 11pm on Tuesday, hours after giving a statement under caution to national security police. He had been called in for a meeting at police headquarters where he was asked to explain acts that had allegedly violated the national security law.
24. Exclusive: Russian firms rush to open Chinese bank accounts
Samuel Shen, Reuters, March 3, 2022
25. Chinese in Ukraine Fend for Themselves as Beijing Takes a Careful Stance on Russia’s Invasion
Sha Hua, Wall Street Journal, March 2, 2022
ENVIRONMENTAL HARMS
26. China buys more Iranian oil now than it did before sanctions, data shows
Chen Aizhu and Alex Lawler, Reuters, March 1, 2022
27. China puts coal plants at full capacity, even as it touts hosting a 'green' Olympics
Bill Chappell, NPR, February 16, 2022
Beijing Olympics organizers have repeatedly promised to host the greenest Games ever, aiming at carbon neutrality. But outside of the Olympics, things aren't so green: the central government pledged this week to run China's coal power plants at full capacity to meet energy demands.
"Coal supply will be increased and coal-fired power plants will be supported in running at full capacity and generating more electricity, so as to meet the electricity needs for production and residential consumption," according to China's state-run Xinhua news agency.
28. China's Zhejiang approves new $1.1 bln coal-fired power plant
David Stanway, Reuters, February 9, 2022
FOREIGN INTERFERENCE AND COERCION
29. TikTok is facilitating the spread of misinformation surrounding the Russian invasion of Ukraine
Abbie Richards, Media Matters, February 25, 2022
China Media Project, March 1, 2022
Aired on the Discovery channel in Southeast Asia and India — and perhaps coming soon to a channel near you — Journey of Warriors may look like just another documentary survival series. But there is more to this internationally co-produced adventure than meets the eye.
31. Strong Stance on China and Peng Shuai Helps Land WTA a New Title Sponsor
Christopher Clarey, New York Times, March 3, 2022
32. SUNY campuses quietly close Chinese government-backed programs
Pete DeMola, Times Union, February 27, 2022
HUMAN RIGHTS AND RELIGIOUS PERSECUTION
33. The War In Ukraine: A Uyghur Perspective
Kok Bayraq, Bitter Winter, March 2, 2022
Humanity is currently witnessing the horrors of how some “brotherhoods” work in the world. Nowhere is this clearer and more terrifying than in China’s relationship with the Uyghurs and Russia’s relationship with Ukraine.
Putin has claimed that Ukraine and Russia were originally one nation, and that this kinship and the inability of Ukraine to self-govern itself were among the reasons for the war. Let us be naïve, as Putin perhaps expects us to be, and ask: If this is the case, then how could he shoot his brother? How does his heart allow him to drop bombs in his brother’s yard?
Similarly, China has been calling East Turkestan (Xinjiang to China) part of its country since its ancient times, claiming that the Uyghurs are the happiest members of the big Chinese family. If so, why are concentration camps being set up and Uyghurs not allowed to reunite with their families and submitted to forced birth control? Why is China worried about an increase in the population of its “brothers”?
There are many commonalities in kinship theories about China and about Russia. For example, just as Putin used historical “facts” to prove his kinship with Ukraine by stating that “Russians and Ukrainians are one people” and “Kiev is the mother of Russian cities; we cannot live without each other,” Xi Jinping claimed, “The Han nationality is inseparable from the minority (Uyghurs), and the minority is inseparable from the Han nationality.” He stated, “It is necessary to promote all ethnic groups to hug each other like pomegranate seeds in the large family of the Chinese nation.”
Russia is unhappy that Ukraine is trying to be a free and democratic state, and sees its possible accession to NATO as dangerous. Similarly, China is unhappy with the Uyghurs’ Muslim identity, and sees it as a threat to its national security. China even denies Uyghurs’ Turkic roots, and insists that “hostile forces are trying to split the country.” Even more surprisingly, although China is friends with the Islamic world, the Islamic faith of the Uyghurs is considered a disease and a virus, and China has set up camps to eliminate it.
In a civil society, older siblings may criticize younger siblings for making mistakes; in the worst case, the older one may slap the younger, but never stab. If Russia considers Ukraine its relative, it should offer full support to let Ukraine feel this brotherhood, help Ukrainians forget Soviet-era oppression, and allow them to return voluntarily to Russia if they want to. It should not be worried about Ukraine’s attempt to be a member of the NATO. If Ukrainians really are relatives and brothers, they may have their experiences outside the common home but in the end they will return there.
If China believes that the Uyghurs are part of the Chinese family, while exploiting the unlimited natural resources and strategic position of the Uyghur region, it should also give the Uyghurs the necessary political and economic status to help them feel their “brotherhood” and a sense of fairness.
Clearly, Russia and Ukraine, China and the Uyghurs are not brothers; they are strangers to each other. They may have been living together or been god or bad neighbors to each other in history, but they never were siblings.
So the real question in this topic is the mental status of the dictators while they make their statements, not kinship. Thus, why would Russia and China refer to these relationships as kinship instead of as historical neighbors? Why would they make obviously illogical statements? The purpose may be to gain time for their operations by deceiving and confusing the international community, which is a common tactic of both countries. Putin hid his intentions, even as he gathered 150,000 troops on the Ukrainian border by mocking Western media reports that Russia was about to occupy Ukraine. China, meanwhile, hid the existence of concentration camps for twenty months, but when they were discovered, the camps were labeled “vocational training centers.”
But more likely the real reason for the illogical “brotherhood” statements may not be intentional; rather, it could be the revelation of a criminal psyche. Studies have shown that when persons commit a crime, they lose their mental balance and make false judgments. The loss of balance may stem from being overconfident in their power or from fear about the damage their criminal actions have created. In either case, the false claim can be seen as an indicator of the crimes they committed or are planning to commit.
The lesson to be learned in these cases is that, when a totalitarian government refers to a particular group in or around the country as “our brother,” or declares that “we can’t live without each other,” yet it intends to occupy its land and destroy its identity, this is a sign that it had already started a genocide or waged a war against its “brothers,”
If the international community is sincere in its commitment to freedom and human rights, it is important for it to “detect” such “brotherhoods” in a timely manner, and prevent further escalation of their horrific actions, by showing no patience for the tyrants’ lectures.
China has silently eliminated a significant portion of its “brothers” from the Uyghur population and continues to do so through genocidal methods. “The birthrate across the region fell by nearly half (48.74 %) in the two years between 2017 and 2019,” according to an independent scholarly report. If this lesson is not learned, China will also proceed to “hug” its Taiwanese “brothers,” maybe with nuclear weapons, and Russia will do the same. After its war on Ukraine, Russia will likely be looking for other long lost “brothers” in Asia and Europe.
34. Where is Xiao Jianhua? Officials mum on abduction of Canadian-Chinese tycoon in 2017
Andrew Russell and Sam Cooper, Global News, March 1, 2022
Harry Lathan Coyle, Eurosport, February 16, 2022
36. British Olympian Kenworthy bows out with blast at IOC
Gus Kenworthy, YahooNews, February 19, 2022
British freestyle skier Gus Kenworthy does not feel the IOC's "heart is in the right place", he said Saturday, as he bowed out of the Olympics for good by accusing the governing body of "greed".
Kenworthy, a silver medallist in 2014 for the USA before switching allegiance, has been a fierce critic of the International Olympic Committee's decision to award China the Winter Olympics because of its "appalling" human rights record.
He told AFP earlier this week that he has been trying to "tread lightly" while he is in China.
But the 30-year-old did not hold back after competing in Saturday's halfpipe final — his last event before retiring.
"It was never that I thought China couldn't put on a good Games — I absolutely knew that they could and they have," he said.
"But when there are human rights atrocities happening in the country and a poor stance on LGBTQ rights, then those things need to be taken into consideration by the IOC."
Kenworthy came out as gay shortly after winning silver in slopestyle at the Sochi Games, and he has been an outspoken supporter of LGBTQ rights at the Olympics.
37. Ex-Hong Kong Radio Host Is First Convicted in Sedition Crackdown
Kari Soo Lindberg, Bloomberg, March 2, 2022
38. Hong Kong, Buckling Under Covid, Leaves Its Most Vulnerable in the Cold
Vivian Wang, New York Times, March 2, 2022
INDUSTRIAL POLICIES AND ECONOMIC ESPIONAGE
39. U.S.-China Trade Relations
Karen Sutter, Congressional Research Service, March 2, 2022
40. U.S. Says It Is Realigning Its China Trade Policy
Yuka Hayashi, Wall Street Journal, March 1, 2022
The Biden administration said it is realigning its trade policy toward China, looking at all existing tools and potentially new ones to combat Beijing’s state-led nonmarket practices.
In its annual trade policy agenda released Tuesday, the Office of the U.S. Trade Representative said the U.S. is raising its concerns directly with China and accelerating joint work with allies and partners.
“We are clear-eyed about China’s doubling down on its harmful trade and economic abuses,” the USTR said in the report, noting that its “holistic and pragmatic” approach to the bilateral relations will focus on long-term benefits for American workers.
“Lack of protections for workers, a weak environmental regime, and anticompetitive subsidies are the hallmarks of China’s artificial comparative advantage. It is an advantage that puts others out of business and violates any notion of fair competition,” it said.
41. US to compete with China’s ‘harmful’ trade practices through domestic recovery and allies
Ralph Jennings, South China Morning Post, March 2, 2022
‘We are clear-eyed about China’s doubling down on its harmful trade and economic abuses,’ the United States Trade Representative’s annual report says. While light on details, report says US will bolster ties with trade allies that are also concerned about Chinese business practices.
42. Chinese Property Developers’ Broken Promises Erode Investor Confidence
Rebecca Feng, Wall Street Journal, March 3, 2022
After more than 10 dollar-debt defaults by property developers over the past year, many investors have come to the conclusion that trust is broken in the $200 billion market for high-yield bonds of Chinese companies.
43. DiDi, Lenovo under fire in China after reportedly exiting Russia
Zeyi Yang, Protocol, February 28, 2022
CYBER AND INFORMATION TECHNOLOGY
44. In Xinjiang’s Tech Incubators, Innovation Is Inseparable from Repression
Jessica Batke, ChinaFile, February 28, 2022
45. TikTok’s effects on kids and teens under investigation by states
Lauren Feiner, CNBC, March 2, 2022
MILITARY AND SECURITY THREATS
46. China to raise defense spending 7.1%, outpacing GDP target
Nikkei Asia, March 5, 2022
47. Taiwan on high alert as invasion of Ukraine draws the eyes of the world away
Louise Watt and Richard Lloyd Parry, Times of London, March 1, 2022
48. Ukraine asks China to make Russia stop war, says Ukrainian foreign ministry
Natalia Zinets, Reuters, March 1, 2022
49. China announces South China Sea drills close to Vietnam coast
Ben Blanchard, Reuters, March 5, 2022
50. Assessing China-U.S. Inadvertent Nuclear Escalation
Wu Riqiang, International Security, February 25, 2022
51. Analysis: Ukraine crisis threatens China's discreet pipeline in military technology
Greg Torode, Reuters, March 3, 2022
ONE BELT, ONE ROAD STRATEGY
52. China’s Belt and Road strafed by Vladimir Putin
Pete Sweeney, Reuters, March 2, 2022
Russia is destroying what China is trying to build. Having refused to condemn President Vladimir Putin’s invasion of Ukraine and suppressed domestic criticism of Russia, Beijing is alienating many eastern European countries where it is constructing trade, investment and technology relationships under its ambitious Belt and Road Initiative.
53. Putin’s War Has Killed China’s Eurasian Railway Dreams
Andreea Brinza, Foreign Policy, March 1, 2022
54. Chinese Company Removed as Operator of Cobalt Mine in Congo
Eric Lipton and Dionne Searcey, New York Times, February 28, 2022
OPINION PIECES
55. Watching China in Europe - March 2022 – What did Xi Know?
Noah Barkin, German Marshall Fund, March 1, 2022
“China is the one country that can exert influence over Russia. But in this case, it doesn’t appear to have done much to dissuade Putin from starting a war in Europe,” one German diplomat told me. “We’ll see how Beijing positions itself now. But this certainly has the potential to do further damage to an already strained relationship with China.”
The events of the past days have triggered a fundamental foreign policy rethink in Europe, and particularly in Germany, whose political establishment had been clinging to a post-Berlin Wall end-of-history vision of the world even as the facts on the ground pointed in a more Hobbesian direction. In the old world, Germany could depend on Russia for its gas, on China to buy its cars, and on the United States to take care of its security. The first of these pillars crumbled over the past week. The second pillar is beginning to show cracks. And the third is likely to depend on having a president in the White House who believes that the transatlantic alliance is worth fighting for.
Editorial Board, Wall Street Journal, March 3, 2022
57. Vladimir Putin is an imperialist, but China does not care
The Economist, March 1, 2022
To the fervent revolutionaries who ran China in 1968, the Soviet invasion of Czechoslovakia was a monstrous crime, but not a surprise. Watching from Beijing, Chairman Mao Zedong and his aides saw a vindication of a long-standing suspicion: that the once-proud Soviet Union was now ruled by “socialist imperialists”, on a par with the capitalists in charge of America, the original imperialist superpower. Indeed, Mao’s deputy, Zhou Enlai, accused Soviet leaders of active collusion with America, involving a scheme to divide the world into two spheres of influence, one run from Moscow and the other from Washington. The invasion was evidence of that pact, Zhou charged: Soviet bosses dared to send tanks to roar down Prague’s cobbled streets, because they knew that America would not intervene.
Chinese outrage did not signal any sympathy for the liberal reforms of the Prague Spring that triggered the invasion, let alone for Alexander Dubcek, the local party boss arrested and flown to Moscow. Instead, Maoist officials described the invasion as a revolutionary struggle, pitting heroic Czechoslovak masses against “fascist” Soviet occupiers. Later, they turned indignant when the jargon of communist diplomacy was used to justify the invasion. Throwing their high-flown phrases back at Soviet leaders, the People’s Daily newspaper in Beijing demanded to know: “You have dispatched hundreds of thousands of troops to occupy the whole of Czechoslovakia. What ‘territorial integrity’ is there to speak of?”
58. A New Nuclear Debate in Japan
Editorial Board, Wall Street Journal, March 1, 2022
59. Putin has reignited the conflict between tyranny and liberal democracy
Martin Wolf, Financial Times, March 1, 2022
A war of choice on the children of a peaceful democracy is not an action we can allow ourselves to forget.
Nobody knows how this will end. But we do know how it began. Vladimir Putin has mounted an unprovoked assault on an innocent country. He has committed the worst act of aggression on European soil since 1945 and has justified this vile act with outrageous lies. He has also, for the moment, united the west against him. Putin is not the first tyrant to confuse a wish for peace with cowardice. He has instead roused the anger of western peoples. The result is a range of sanctions on Russia as impressive as it is justified.
Putin may be the most dangerous man who has ever lived. He is dedicated to restoring Russia’s lost empire, indifferent to the fate of his own people and, above all, master of a vast nuclear force. Yet resistance, however risky, is imperative. Some will insist that Putin’s actions are the west’s fault and above all the result of its decision to extend Nato. The reverse is the case. Putin has reminded us why the countries that knew Russian rule best were desperate for Nato’s expansion. He has also demonstrated why it was necessary. Europe needed a defended border between Russia and its former possessions. Ukraine’s tragedy is to be on the wrong side of that line. It did not pose a threat to Russia, other than by wanting to be free; Russia posed a threat to it.
Sanctions are often ineffective. Those imposed this time will not be. The US imposed sanctions on the secondary market in sovereign debt on February 22. Germany suspended the certification of the controversial Nord Stream 2 gas pipeline on the same day. On February 24, the US, EU and other members of the G7 limited Russia’s ability to transact in foreign currencies. And two days later, a number of Russian banks were removed from the Swift payments network, a freeze was imposed on the Bank of Russia’s assets and transactions with the central bank were prohibited.
A thorough analysis by the Institute for International Finance sums all this up: “We expect sanctions imposed in recent days to have a dramatic effect on Russia’s financial system as well as the country as a whole.” A big share of the country’s $630bn in liquid reserves will be rendered useless. The central bank has already had to double interest rates. There are runs on banks. With the exception of energy, the economy will be substantially isolated. (See charts.)
The pain will not all fall on Russia. Costs of oil and gas will be high for longer, exacerbating global inflationary pressure. Food prices will also rise. Should Russia cut off its energy exports (at great cost to itself), the disruption would be even more severe. Russian natural gas generates 9 per cent of gross available energy in the eurozone and the EU as a whole. But winter, the season of greatest need, is at least passing.
Beyond these relatively specific effects, the combination of war, nuclear threats and economic sanctions hugely increases uncertainty. Central banks will find deciding how to tighten monetary policy even more difficult. The same will be true for governments trying to cushion the blow of energy shocks.
In the long term, the economic effects will follow geopolitics. If the outcome is a deep and prolonged division between the west and a bloc centred on China and Russia, economic divisions will follow. Everybody would try to reduce their dependence on contentious and unreliable partners. Politics trumps economics in such a world. At a global level, the economy would be reconfigured. But in times of war, politics always trumps economics. We do not yet know how.
Europe will surely change most. A huge step has been taken by Germany, with its recognition that its post-cold war stance is now untenable. It has to become the heart of a powerful European security structure able to protect itself against a revanchist Russia. This must include a huge effort to reduce energy dependency. Tragically, Europe needs to recognise that the US will not be a reliable ally so long as Donald Trump, who views Putin as a “genius”, commands the Republican party. Britain, for its part, has to recognise that it will always be a European power. It must commit itself more deeply to the defence of the continent, above all of its eastern European allies. All this will need resolve and cost money.
In this new world, the position of China will be a central concern. Its leadership needs to understand that supporting Russia is now incompatible with friendly relations with western countries. On the contrary, the latter will have to make strategic security an overriding imperative of their economic policy. If China decides to rely on a new axis of irredentist authoritarians against the west, global economic division must follow. Businesses have to take note of this.
A war of choice on the children of a peaceful democracy is not an action we in the west can allow ourselves to forget. Nor can we forgive those who started it or those who support it. The memories of our own past must forbid it. We are in a new ideological conflict, not one between communists and capitalists, but one between irredentist tyranny and liberal democracy. In many ways, this will be more dangerous than the cold war. Putin holds unchecked and arbitrary power. So long as he is in the Kremlin, the world will be perilous. It is not clear whether the same is true of China’s Xi Jinping. But we may yet learn that it is.
This is not a conflict with the Russian people. We should still hope for them a political regime worthy of their contribution to our civilisation. It is a conflict with their regime. Russia has emerged as a pariah ruled by a gangster. We cannot live in peace and security with such a neighbour. This invasion must not stand, since its success would threaten us all. We are in a new world. We must understand that and act accordingly.