ANALYTICS

17.09.2022 | To Contain Xi, Defeat Putin in Ukraine
by Victoria Coates,Marshall Billingslea - The National Review

KEY TAKEAWAYS

1. There isn’t real cooperation between the U.S. and the PRC on Ukraine. There won’t be until President Xi Jinping fears he has more to lose than gain.

2. Xi is bankrolling Putin’s invasion in exchange for cheap energy, an arrangement that suits them both handsomely.

3. When dealing with lawless and unpredictable foes, you sometimes need a clear and unambiguous demonstration of strength to shock them back into line.


Apernicious myth has emerged in Western media that the Biden administration and the People’s Republic of China are engaging in constructive cooperation that will enable the administration to achieve its key strategic goal of defeating Vladimir Putin in the war in Ukraine. The potential for upending this diplomatic process is purportedly what so upset the White House over the recent visit of Speaker of the House Nancy Pelosi to Taiwan. While there are reasons to be skeptical about her travel, this isn’t one of them.

The expeditious defeat of Putin is certainly a national-security priority for the United States, though it pales beside the longer-term strategic challenge we face: the rise of an aggressive and hostile China. But these two issues cannot be isolated from each other, if only for the simple reason that China approaches our competition holistically, regardless of America’s desire to work together on space, climate, or anything else. There isn’t real cooperation between the U.S. and the PRC on Ukraine. There won’t be until President Xi Jinping fears he has more to lose than gain from bankrolling Putin’s murderous aggression. This might also give him pause when considering excursions of his own, notably against Taiwan.

Putin largely stunned the civilized world on February 24 when his tanks rolled into Ukraine and the carnage began. Lulled into a false confidence that he would not upset the international order, owing to his need to sell energy to Western Europe, the European Union and the United States had assumed that his saber-rattling was just that, and that he would not invade. Xi, however, was well aware of the plan, having been briefed on it by Putin himself during their meeting on the margins of the Olympics earlier in the month.

Fearing to escalate the conflict, the Biden administration has reluctantly focused on limited economic sanctions, export controls, and military aid. Perhaps surprised by the strong initial response, led by the United Kingdom and the EU, Putin might have been concerned with Russia’s economy in March, but by April it was clear that Biden would not follow up with truly crushing measures. And then Xi stepped in with a further lifeline. While it is true that China is not (openly) transferring drones or the other matériel Putin wants, that is hardly all the Chinese president has to offer. Xi has historically avoided military entanglements and relied instead on China’s growing economic clout to persuade or coerce other nations into compliance with China’s goals.



So while Europe began scrambling for alternatives to Russian energy imports, and the U.S. and U.K. declared an outright ban on them, China started a massive buying spree—at discounted prices—of Russian gas and oil. This diversified its supply during the current global energy crisis, as Russia quickly surpassed Saudi Arabia as the lead exporter of energy to China in May, a position it has now held for three months and counting.

In other words, Xi is bankrolling Putin’s invasion in exchange for cheap energy, an arrangement that suits them both handsomely. The only reason Xi would stop would be if he saw crushing consequences threatening Russia and feared sharing Putin’s fate. Here’s how to do it:

First, focus on the center of gravity of the Russian economy: the banks. Russia is a major exporter of raw commodities, including oil and gas, metals, minerals, and timber. Russian banks, and its central bank, are essential to facilitating cross-border sales of these goods. Moreover, they do this in dollars (or euros), since the ruble is a worthless currency outside of Russia. For that, they have to work with other non-Russian banks. So step one is to sanction all Russian banks, and do so under Executive Order 14024 in a way that places “secondary sanctions” on anyone who keeps transacting with the targeted entity.

President Biden hasn’t allowed his Treasury to do this. Not only are a number of Russian banks not sanctioned, but those that are aren’t covered by secondary measures. In fact, Treasury even undercut its own banking sanctions by issuing a General License (G.L.) that exempts all energy trade with Russia from any sanctions until December. So, step two: Repeal G.L. 8C so that anyone transacting with a Russian bank, whether for oil and gas or Lada cars, can be targeted. The chilling effect on Russia’s economy would be immediate and massive. The solvency of the Russian financial system would be in jeopardy, the ruble would take a nosedive, and the central bank would have to choose between funding Russian genocide in Ukraine and spending its hard currency reserves on saving the collapsing economy.

Finally, deploy the Treasury and State Departments, as well as the National Security Council staff (as we were deployed by President Trump in support of his maximum-pressure campaign against Iran), to carry to China, India, and others the message that time has run out. We will not tolerate continued bankrolling of the Russian war machine. Regardless of the predictable denunciations from Chinese officials, Chinese commercial interests would prevail. Their banks and companies need access to the U.S. financial system and our markets far more than they need cheap, dirty, Russian oil.


Such a plan would have the added benefit of demonstrating to Xi that the U.S. is willing to use hard economic power when circumstances call for it. Of course, what we are proposing with Russia pales by comparison with what would be required to enact a similar policy against China. But both of us had the honor to work for former secretary of defense Donald Rumsfeld, and he included in his famous Rules the Chinese proverb “Sometimes you have to kill a chicken to frighten the monkeys.”

Rumsfeld understood this to mean that, when dealing with lawless and unpredictable foes, you sometimes need a clear and unambiguous demonstration of strength to shock them back into line. As difficult and risky as it would be to take such drastic steps against Putin, such a strategy is emerging as the only viable path short of direct military intervention to end the war in Ukraine on terms favorable to both Washington and Kyiv—and, hopefully, to avoid an even more dangerous escalation in the Pacific in the process.


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