What is the geopolitical fallout of American sanctions on China?

The United States has come up with a new round of sanctions against China this week in response to the country’s human rights violations against Uighurs in Xinjiang. 

Experts think sanctions often backfire and do not usually lead to policy or regime change in the countries that receive them. For China, nothing suggests it will be any different. 

“If the target country is a large country which has a very strong leader, and has no internal political dissent or conflict, then, in those circumstances, the sanctions are unlikely to produce regime change. There are very few cases where regime change has occurred in such cases,” said Gary Hufbauer, a former top US treasury department official, and one of the leading experts on US sanctions. 

China appears to fit into Hufbauer’s description very well. It is a large country, has a strong leader, Xi Jinping, and has very limited dissent. 

“[As a result] sanctions against Russia or China didn’t change the political situation very much if at all. So those are the two extremes,” Hufbauer added, during a previous interview with TRT World. 

Besides China, the US has also imposed sanctions on Russia. President Biden pledged that Russia’s powerful post-Cold War era President Vladimir Putin “will pay a price” for the country’s alleged interference with the 2020 US elections. 

But at the same time, US sanctions will definitely have an effect on China’s growing economy, forcing Beijing to find other partners, like Iran and Venezuela, to ensure political and financial stability at home. 

The possible partnership could also put the Biden government’s mediation efforts with Tehran and Caracas in danger. Under Trump, US relations with both Iran and Venezuela deteriorated - Biden will look to improve them.

Washington’s sanctions will also put China at odds with the EU, a trade partner of China. Beijing signed a market-access agreement with Brussels, but with US sanctions against China, it could become a diplomatic hassle for the European Parliament to ratify that deal. 

Russia-China axis

US sanctions might end up reinvigorating the old China-Russia alliance going back to the Cold War. During the Nixon presidency in the 1970s, Washington began developing a rapprochement policy with Beijing in order to break up the two powers and weaken the communist bloc. 

Nixon’s move worked as China slowly warmed to developing good relations with the US. After the Cold War, China’s communist party has increasingly embraced capitalism, tightening connections between Beijing and Washington. 

During a visit to China on Monday, Sergey Lavrov, Russia’s longest serving foreign minister, invoked the old anti-imperialist sentiment saying that both Beijing and Moscow are working to defend the interests of humanity - against the West. 

“These objective developments, which are leading to the formation of a truly multipolar and democratic world, are unfortunately being hindered by western countries, particularly the United States,” the Russian foreign minister complained in a veiled reference to US sanctions. 

“We need to move away from using international payment systems controlled by the West,” added Lavrov, referring to the Washington-led global financial system and the hegemony of the dollar. He also signalled that China and Russia are trying to develop an alternative currency system and a technological alliance “to reduce sanctions risks”. 

Beyond financial rapprochement, the two powers also seem to be establishing some kind of military alignment in a “more alarming prospect” for Washington and its allies, conducting joint military operations in Northeast Asia in 2019, according to Alexander Gabuev, a senior fellow and the chair of the Russia in the Asia-Pacific Program at the Carnegie Moscow Center, a US-based think-tank. 

“The next step could be the formation of a more profound security partnership that would increasingly resemble a military alliance,” Gabuev wrote in December. 

The enemy of my enemy is my friend

US sanctions on China are bolstering both political and economic cooperation among anti-US powers like Venezuela, Iran, Russia and China. 

“US sanctions have pushed Iran and Venezuela into China’s outstretched arms,” wrote Steve Hanke, an American economist at John Hopkins University, on Twitter. 

After the sanctions, China began importing large amounts of oil from Iran. Beijing also increased its oil imports from Venezuela. Both developments could also prevent the Biden administration from opening a new chapter with the two nations, with which relations worsened under the previous Trump government. 

“If it sells 1 million barrels a day at current prices, Iran has no incentive to negotiate,” said Sara Vakhshouri, president of Washington-based SVB Energy International and an expert on Iran’s oil industry, according to the Wall Street Journal. 

“Sanctions are counterproductive and for losers,” Hanke said. 

EU-China investment deal

Another global effect of US sanctions on China could be the collapse of the long-negotiated EU-China market-access deal, which proposes to remove some of China’s trade barriers to EU companies in industries like the automotive sector, cloud computing, private healthcare and ancillary services. 

The deal is expected to be ratified by the European Parliament in early 2022, but like Washington, Brussels also imposed sanctions this week on four Chinese officials for their alleged involvement in repressing Uighurs, sparking retaliation from Beijing. 

Washington has already shown its displeasure at the deal, the Comprehensive Agreement on Investment (CAI), seeing it as a Chinese diplomatic victory that looks towards increasing divisions between the EU and the US. 

Under escalating tensions between the US and China, the CAI’s prospects are pretty much related to where the West-China political dispute will move, according to Valdis Dombrovskis, the EU’s trade commissioner.

“China’s retaliatory sanctions are regrettable and unacceptable. The prospects for the CAI’s ratification will depend on how the situation evolves,” Dombrovskis said. 

The EU-China deal has been seen as “a major step” in guiding future ties between the two political powers. 

“But our trade and economic agenda has European values at its core: pursuing our economic interest goes hand in hand with standing up for our values, including where necessary through sanctions,” Dombrovskis added.