China’s Strategy Emerges (or rather doesn’t…)
Speculation has been rampant about how Russia and China would work together to defeat the sanctions. China has not overtly supported Russia and has been playing cagey. They have expressed “deep concerns” about the war but have not condemned it.
According to Fox News, Vice Foreign Minister Le Yucheng spoke out, calling the increases in sanctions against Russia outrageous, and supporting Russia’s demands that NATO not expand closer to Russian borders.
According to CNN, while the two states said last month stated their “friendship has no limits,” China has signaled some limitations. While new trade contracts have been signed, Russia cannot support its military needs from just the Chinese tech industry. And Chinese tech companies will be careful to avoid the fate of Huawei, which was cut off from its semiconductors sources by the U.S. government.
American lawmakers are thinking about sanctions against Chinese companies and Chinese banks who continue to do business with China. It appears that no one will be allowed to be neutral in this fight without consequences.
Politico claims that China is considering military assistance. I’m doubting this. It would not make sense for China to provide direct support at this point, not until they believe Putin’s victory is assured. No point in backing a losing horse. China has assured Biden it would not send weapons.
China could also convert Russia’s $90 Billion in Yuan to dollars or Euros to give Moscow some hard currency, but they have not done it yet.
But China has signed Russian banks onto its Cross-Border Interbank Payment System (CIPS), a clearing and settlement system. This softens the blow to Russia for being kicked off of SWIFT. But its function is limited to 75 banks, as opposed to 11,000 on SWIFT.
Commentary: What we see is China’s rosy red butt planted firmly on top of the fence. On one hand, Xi and Putin have become close strategic partners and Xi is making noises of support for Russia. Further, Xi is expecting Putin to test the West’s resolve in Ukraine since this will inform their strategic plans for absorbing Taiwan and moving to control the rest of the region.
On the other hand, while China is Russia’s biggest trading partner, Russia is only 2% of China’s trade, and China does not want to be affected by the sanctions on Russia. It’s really a matter of money.
I believe their moves will be as follows:
1. China will not provide military support to Russia in the near term, in fact, material support will be limited for the next several weeks. Putin doesn’t need in this phase. They will reconsider their position when Putin meets or doesn’t meet his timeline for victory.
2. Look for China to become more vocal. This is their safest move, to yell and scream without overt material support. China will continue to protest the actions of the West and block resolutions by the U.N.
3. China anticipates that the military part of the war will be over soon, and it expects to emerge a winner whether Russia succeeds or fails. China will provide as much overt aid as possible without risking sanctions, but it will provide under-the-table support where it can.
4. China’s primary interest in the Russia-Ukraine situation is to inform its own strategies, to gauge the reactions and methods of the West in preventing aggression in the world. But Putin’s strategy is underway, China’s support in the near term is not required. In fact, if China needs to, it can even temporarily turn against Russia and still meet those needs. You may see China turn on a dime if it serves their economic interests.
5. I believe that if Putin fails, China will turn its back on him in a heartbeat and support whatever new leadership emerges in Russia.