The Dragon, the Bear and the risk of a new round of sanctions

Genoa – Chinese President Xi Jinping’s visit to Moscow comes at a time of great need for his Russian counterpart Vladimir Putin. It also comes at a time of great need for Xi Jinping if he wants to emerge as a global dealbroker, a role that goes against China’s historic neutrality and non interference policy but one that recently produced unexpected results when Beijing brought Riyad and Tehran to the negotiating table.

The announcement of Beijing's unexpected geopolitical success came shortly after the publication of China’s 12-point paper on the ‘Political resolution of the Ukraine crisis’. A document that was largely dismissed by western leaders and met with little enthusiasm in Moscow and Kyiv. Nevertheless, Beijing’s plan for the resolution of the crisis indicates a new strategy and a new role for China on the global chessboard.

While details of Xi Jinping’s visit to Moscow are scarce and the issues that he will address with Putin remain something of a mystery, there can be no doubt that in addition to discussions on trade and cooperation, Ukraine will be high up on the agenda.

While the meetings will give the Russian president the opportunity to further clarify Moscow’s perspective and position and push for greater support, the visit will offer Xi Jinping the opportunity to attempt the role of mediator and global statesman.

Vladimir Putin and Xi Jinping will examine in detail a number of aspects of the peace plan proposed by China to end the conflict in Ukraine, however, it is unlikely that Putin will entertain the concept of a gradual de-escalation leading to a comprehensive ceasefire.

Faced with the likelihood that Putin will remain unmoved and that Russia’s strategy will remain that of the long-war, Xi Jinping will have very few alternatives other than reiterating Beijing’s preference for de-escalation, accepting Moscow’s position and offering support, or walking away from the encounters without reaching any form of agreement.

MILITARY SUPPORT
While discussing Ukraine it is undoubtable that military cooperation will be addressed, indeed Kremlin aide Yuri Ushakov told the Russian news outlet Vedomosti on Monday that Defence Minister Sergei Shoigu would participate in the talks.

To date Chinese military support has consisted in dual use technology such as electronic parts that are compatible with anti-aircraft radar systems and civilian drones that can be adapted to military use.

Further examples of support include the supply of commercial satellite imagery of benefit to Russian ground forces in Ukraine. While there are no indications of China having supplied anything other than technologies that constitute non-lethal support, last month the US Secretary of State Antony Blinken warned that any supply of lethal support would have “serious consequences” for Beijing. In the event that Putin manages to convince Xi Jinping to appreciate and support the position that Russia is facing an existential battle for the country’s survival, a consideration that will be in large part influenced not only by the Russian president’s arguments in favour of continuing the military campaign but also by Beijing's views on the causes and potential outcomes of Russia’s invasion of Ukraine, China may very well consider the supply of lethal technologies and equipment.

THE OUTCOME
What is clear is that the immediate reaction to the supply of arms and munitions to Russia would be the implementation of Secretary Blinken’s “serious consequences”: a harsh and rapid sanctions regime against China.

What is less clear is whether China would go as far as supplying Moscow with lethal weapons on a large scale. Any similar action would be uncharacteristically reckless of Beijing as the consequences would be of enormous economic harm.

One of the few developments that could influence China’s decision to supply arms and munitions would be one in which the Russian forces were facing an immediate defeat on the battlefield and, by consequence, Putin’s hold on power was at serious risk.

In a similar scenario the autocrat might very well decide to help his fellow autocrat and run the risk of economic damage. By now China holds very little hope of repairing its relationship with the United States but Europe remains an important trading partner and therefore a relationship that has to be protected - a consideration of particular importance given the damages to the Chinese economy caused by Beijing’s zero-Covid policy. Xi Jingping’s problem is that Europe is ever more tied and dependent on the United States because of a unified position on Ukraine. This situation presupposes that any sanctions regime introduced by the United States would be supported by Europe.

THE IMPACT OF A NEW SANCTIONS REGIME
European companies would suffer a variety of serious economic and financial damages were a harsh sanctions regime to be implemented against China and therefore the first question that should be raised is: would sanctions be efficient? Contemporary history would suggest not, however, there are few alternatives and in the absence of choice many states will implement measures without fully understanding their potential implications.

According to Enrico Vergani, partner and team leader of Focus Team Shipping, Transport & Logistics at the Italian law firm Bonelli Erede: "A new round of sanctions, this time directed against China, would require a realistic approach, moving from a detailed study of the implications from a geopolitical point of view and the impact on Italian and European companies and operators.”

Another question is if governments should make a determined effort to understand the potential domestic damages of sanctions against China and discuss them publicly? “There is also the need for clear and coherent communications in regards to any measures that a government considers adopting, their suitability for the purpose, the time frame over which they would be implemented and remain in place and the effects on the economic systems of the countries adopting the sanctions. The measures taken against Russia have clearly highlighted the difficulties in managing an approach originally intended as a short term strategy but one which has instead lasted for over a year. To further compound difficulties, the measures were delivered in ten diverse rounds which on more than one occasion were characterised by contradictory provisions and more often than not difficulties in interpretation.”

SHORT-TERM VERSUS LONG TERM
As the sanctions against Russia have demonstrated, short-term results are very rarely forthcoming thus how long could or should sanctions last and when implementing sanctions do governments take this into consideration? Vergani’s view is that “The application of long-term sanctions, for example the United States against Cuba and Iran, requires an approach that sacrifices in the name of efficiency a series of defence guarantees, sometimes even at constitutional level, of a nation’s own citizens. This is how OFAC (the government agency that deals with sanctions and their application in the United States) works. Some may consider this attitude cynical but it works very well and, in the long run, the adoption of a similar approach might be necessary in Europe. However, the adoption of a similar tactic must be communicated very clearly to all of those who will be called upon to interpret and apply legislation. But most importantly it must be communicated clearly so that those impacted can evaluate the consequential risks.”

And here lies the problem, a lack of clear strategies and a tendency not to communicate the details in an efficient manner leaves those directly and indirectly impacted struggling to try and understand what the consequences of a sanctions regime will actually be.

From both an altruistic and egoistic point of view, we can only hope that Xi Jinping is sincere in his desire to broker a peace settlement between Moscoa and Kyiv and that he succeeds in his mission. Unfortunately, very few analysts are betting on this.

*Monact Risk Assessment Services, Director