Overview
A duty of a healthy society is to address existential threats. In our opinion, Western countries have made a major miscalculation with long-lasting consequences.
Underlying Premise
American foreign policy has been guided by the claim that Russia and, increasingly, China are the major threats to its sovereignty. Thus, any action to weaken or embarrass particularly Russia was worthwhile, especially if America could avoid direct involvement. Some efforts to improve relations occurred, such as Margaret Thatcher’s efforts with Gorbachev¹ to warm relations in the 1980’s and 1990’s, or China’s entry into the WTO in 2001. Despite these efforts, relations have worsened in many ways.
Ukraine has been Exhibit A, whereby Russia has expended a significant portion of their military resources and is currently undergoing the humiliation of having its borders breached, with Ukraine occupying portions of Kursk. To date, the feared use of nuclear weapons has not occurred, even the smaller, so-called “tactical” nuclear weapons. Russia probably fears becoming a pariah state if it uses such weapons and would do so only as a last resort.
Furthermore, a direct Chinese invasion of Taiwan would likely come at a high cost to China and, if it were to become directly involved, America. The Ukrainian conflict has taught us that there are currently not sufficient countermeasures to attacks by relatively cheap drones and missiles on expensive military assets, including ships, such as Russia’s Black Sea fleet.
To blunt the threat of an invasion, America has restricted the supply of tech resources to China.
While under current conditions the above strategy is sound, there are other, perhaps more serious developments occurring.
Recent Developments
The late, great diplomat Dr. Henry Kissinger regularly warned against allowing China and Russia to join forces², which appears to be exactly what has happened with their “everlasting” friendship. Manifestations of their relationship include China’s supplying Russia with raw materials, ammunition via its ally North Korea, and currency via its purchase of petroleum.
The development afoot is that China and Russia might be in the process of resetting the global strategic stage in a manner such that the U.S. will be forced to recognize its hegemony has ended.
The new order might be that Russia provides China with energy and food in exchange for goods and technology. Given the rail and sea connections between the two countries, there would be little nexus for the U.S. to exert its influence.
While the West could respond with a continuation of technology sanctions, such measures can easily be countered, and furthermore, China and Russia can obtain what they need from each other. Additionally, China could involve its neighbors in this burgeoning trade route, thereby blunting the support such nations have had.
Implications
If the above scenario plays out, the consequences will be massive:
European Manufacturing Base – One could argue that the manufacturing base is already under threat as the China-dominated electric vehicles are threatening the dominance of the old stalwart German-based producers such as Mercedes, BMW, and Porsche SE (owner of Volkswagen and Audi). Also, with the absence of lower-cost natural gas, a broad swath of firms is threatened, with chemical companies at or near the top of the list.
Middle East Energy – China’s need for energy from the Middle East would ease, although India would likely continue their purchases, either from Russia or the Middle East. If predictions concerning the increasing efficiency of solar cells are realized, demand for legacy energy sources may wane. China, like America, has deserts with ample sunshine in the western part of its country (Gobi and Taklamakan), that may be well suited for solar farming.
Chinese Exports – China’s exports are facing increased tariffs, especially among electric vehicles.
Continued War Efforts – Russia can garner the cash and resources it needs to continue the war effort.
Technology Leadership – For those who believe China will be in the backwaters if cut off from Western technology, the following quote might be useful:
“The US sustains technological dynamism in areas such as artificial intelligence and microchip design, yet US breakthroughs are quickly matched in China through the spread of know-how and advances pioneered by China. Most of the world’s green and digital hardware -- including advanced solar modules, wind turbines, nuclear power plants, batteries, chips, electric vehicles, 5G systems, and long-distance power transmission – is manufactured in Asia, with a large share in China or Chinese-dominated supply chains.” ³
Caveats – Like elections, much can change in a short period of time. We will remain watchful.
Sources
[1] https://blogs.lse.ac.uk/politicsandpolicy/thatcher-end-of-cold-war/
[2] https://www.ft.com/content/cd88912d-506a-41d4-b38f-0c37cb7f0e2f
[3] http://news.heraldcorp.com/insight/view.php?ud=20240827050383