Sanctions and the spectre of deglobalisation
Superlatives typically serve the purpose of weaponising rhetoric and outrage.
Superlatives typically serve the purpose of weaponising rhetoric and outrage. The sanctions imposed on Russia are described as the 'toughest', 'unprecedented' and 'like none the world has seen before'. Yet, over 1.2 million have had to seek refuge in Poland and Romania and over 40 million people across Ukraine could soon be refugees in their own land.
Russia's major banks stand expelled from the global payments system. Its central bank is barred from tapping most of its USD 600-billion-plus reserves, multinational companies are pulling out - retrenching investments, production and sales. A week into the war, the waves of sanctions have been matched by waves of missile and artillery attacks and boots on the ground.
Notwithstanding the Saturday pause, the ceasefire deal on humanitarian grounds, Ukraine is under siege encircled by one of the world’s largest nuclear powers, its army resisting the advance and Volodymyr Zelensky is still standing. Neither the sanctions nor threat of new ones appear to have stirred Vladimir Putin nor shaken his resolve.
The record of sanctions to deter invasion or change the behaviour of aggressors/invaders is far from inspiring. In August 1990, the UN Security Council imposed sanctions on Iraq to force it out of Kuwait. Saddam Hussein scarcely moved. In January 1991, a coalition force of 30-plus countries led by the US conducted 'Operation Desert Storm' to evict Iraq.
In October 1999, the UN imposed sanctions on Al Qaeda, its leader Osama Bin Laden and the Taliban. Nearly two years on, Al Qaeda operatives carried out the 9/11 terror attacks. While Bin Laden was killed in 2012, the Taliban is back in power. And despite a series of sanctions imposed since 2014 following the annexation of Crimea, Putin has continued on his path. Russia has deployed both conventional tactics in theatres such as Donbas and cyber warfare on global targets pretty much with what can be called Putinesque impunity!
The efficacy of sanctions wholly depends on the filters/fencing that scaffolds it. It is not a secret that the filters are far from perfect. Countries have found ways to beat the system - for instance, Iran has offloaded a part of its crude oil output through proxies even though it remains under sanctions. And the proxy playbook is not unknown to Russia. The current lot of sanctions are aimed at denying Russia monetisation of its resources and access to critical technology and goods. China is Russia's largest trading partner and the scale of the engagement affords Moscow the opportunity to deal with the sanctions challenge. The expansion of engagement between China and Russia will accelerate the creation of sanctuaries and has the potential to aggravate the spectre of deglobalisation.
The instruments of circumvention could range from the simple yester-year Yuan-Rouble deals to adoption of the digital currency to more complex arrangements - where Russian companies open Yuan accounts with Chinese banks, where Chinese companies deploy/create shell structures to front trading in Russian output in global marts. The enlargement of the accommodative relationship has the potential to upend the accepted and adopted financial architecture, disrupt established supply chains, slow down world trade and weaken global growth.
The fundamental cause of failure of sanctions is convenient ideological ambivalence on issues which must matter - this is worsened by fear of long wars and rising inadequacies of regimes in dealing with domestic politics. The design of action, therefore, is often afflicted by symbolism, of the "we must do something" genre when faced with actions upending rule-based systems.
The consensus of compromises is visible in the design of the current sanctions package. The logic of sanctions is crippling of economic capacity - by demonetising trade, investment routes and even reserves of the targeted entity - to deny funding of aggression. But by leaving out the energy basket, the sanctions allow Putin to fund the war machine. The harsh reality is that the design and implementation of sanctions have often left the victim unattended and let the offender scot free. Critically, the sanctions must achieve the objective of strangulation by triangulation. This requires sanctions to be flanked by other instruments of state policy be it military, diplomacy or aid. That though has not been the case.
Consider this. The crisis in Ukraine is seen by many as the prologue to what will follow. China has made no secret of its aspiration on "reunification of Taiwan". Fact is Taiwan is yet to be recognised as a sovereign entity by the US and its stance continues to be "strategic ambiguity". Effectively, the US has not promised to help it fight in the event of a conflict with China but it has also not said that it will not step in. This has been the state of affairs since the days of the Nixon-Mao détente.
There is no disputing that Xi Jinping has made it the cornerstone of his legacy. Xi and Putin have long since scoffed at the ideals propounded by the West. Indeed, the February declaration of friendship with "no limits" symbolises the common aspiration of a united front. The current crisis emboldens China to reinforce the idea that it offers a viable alternative to the Westphalian rule-based world order
There is no mistaking the geopolitical implications.