Ukraine War’s Cost on China

By Ichiro Suzuki At the beginning of February, Russian President Vladimir Putin attended the opening ceremony of the Winter Olympics in Beijing, as one of the few heads of the government or state amid diplomatic boycott of the ceremony by the West. Putin was there though his country did not technically participate in the Games. It was athletes from the Russian Olympic Committee who competed in Beijing. Presence of Putin sent a strong message about the strength of the bond between the world’s two largest autocracies. While Russia is a decisive junior partner in this alliance, Putin may have a different opinion. Russia is abundant in fossil fuel and other mineral resources that China badly wants. Beijing has a priority access to the only things Russia can sell to the rest of the world. So it was supposed to be a great bargain for Chinese President Xi Jinping. The deal appears to be more expensive than was originally thought, as it has turned out. Vladimir Putin is proving himself to be an evil actor beyond Xi Jinping’s comprehension, and the West is suddenly united against Russia’s invasion into Ukraine. China has been advocating observation of territorial integrity based on the borders already in place and non-intervention in internal affairs of other countries. Based on this principle, China has not recognized the 2014 annexation of Crimean Peninsula by Russia. The Chinese Communist Party wants the West to shut up on what they do in Xinjiang, Tibet, Hong Kong and even Taiwan that the CCP considers as a part of the People’s Republic. China has never raised voice on what other developing world autocratic leaders do to their own people. It is a matter of their internal affairs. Then Russian tanks rolled into Ukraine with an aim of overthrowing President Volodymyr Zelensky and installing Russia’s puppet, perhaps former president Viktor Yanukovych, who fled to Moscow in 2014 and still lives there. Bound by a pact with Russia, China has chosen not to condemn the partner for aggression, not even calling the conduct ‘invasion’. Of course, China is no part of U.S.-led sanctions against Russia. However carefully China chooses words on the Ukraine issues to make itself look as neutral as possible, double-standards are already in full display with an image of ‘pro-Russia neutrality’. For years, Putin successfully manipulated to make the West off-balanced, driving in a wedge among older democracies. After all, all these countries have had too much vested interests in Russia. Europe has been heavily dependent on Russia to heat their houses in winter. Germany, especially, has high dependence on Russian natural gas. While the NATO has extended its wing eastward to include former Soviet satellites and the Baltic states that belonged to the USSR, Putin made every effort to keep them from united. Former U.S. President Donald Trump did not care about the Atlantic alliance and showed no interest in strengthening the NATO in the post-Cold War era. It looked that an alliance were disingtegrating from within slowly. So everything was progressing according to Putin’s carefully crafted scenario, until his men invaded Ukraine. Invasion of Ukraine has changed everything in a matter of a few days. The West has become firmly united against an aggressor. Russian banks are excluded from the SWIFT network, and neutral Switzerland is participating in the ban. The Bank of Russia is cut off its links with other central banks, with its assets frozen. Western private corporations are pulling out of Russia, writing down their investments. While Russia has built foreign currency reserves since the annexation of Crimea, the arm chest was neutralized by a sanction on the Bank of Russia. The People’s Bank of China could still lend help to Russia, but at a great cost of making itself look an undisguised conspirator of the aggressor. Russian oligarchs face confiscation of assets outside the country. Russian athletes are banned from competing in anything outside the country, including the Paralympics, figure skating world championship, soccer World Cup qualifiers, grand slam tennis tournaments, etc. Of all the countries in Europe, Germany has woken up overnight more surprisingly than anyone else. New chancellor Olaf Scholtz has announced raising the country’s defense spending to 2% of GDP, after decades of not fulfilling the NATO’s goal. Polls in Sweden and Finland call for a NATO membership, to depart from decades-long neutrality. Nordstream 2 would not become operational and now faces bankruptcy. EU is quickly rewriting its energy policy to lower dependence with Russia. Weapons are reaching Ukraine from NATO member countries, though not troops yet. All of a sudden, older democracies are united to defend freedom and save the world from autocracy. They have realized that there is a price to be paid for being befriended with a pariah. One day when the dust is settled in Ukraine, regardless of how it turns out to be, Europe is going to remember where China stood on this war. The region is already accepting heightened costs associated with Ukraine, in terms of defense, energy security or costs of hosting refugees. In the future Europe is likely to review all the nice things that the People’s Republic has dangled in Belt & Road Initiatives. Ukraine has given Europe a chance to confirm their core value, which they would like to defend at all costs. Though Western corporations would not exit China in droves in a way it is doing out of Russia, further supply chain reviews are certainly coming. Europe would not be easily enticed by an extra billion euro infrastructure projects or export opportunities. Future solicitations from China would be scrutinized carefully. After all, they have learned the risk of excessive reliance on someone who does not share core values with them. Ukraine is Putin’s undoing of Xi’s carefully crafted master plan. In Asia, Russia’s Ukraine invasion has raised the bar on China’s possible takeover of Taiwan. The suddenly tightly united West and UN General Assembly‘s wide support for condemnation of Russia’s action are beyond expectations of the Communist Party. While China holds onto its position that Taiwan has been a part of China for decades, it wouldn’t fly in the international community. Putin thinks Ukraine is Russia’s territory or a buffer state at best. China does not seem prepared to be a pariah like Putin’s Russia. This geopolitical event is a wake up call not only for Taiwan but also South Korea and Japan that face both China and Russia in the Far East. A small country like Singapore has got nervous since the city state’s prosperity hinges on stability provided under the status quo more than anyone. Usually neutral Singapore has joined the West’s sanction on Russia, being aware the potential of offending China. There seems to be a change in balance. About the author: Mr. Suzuki is a retired banking executive based in Tokyo, Japan.