The Asian Ripples From Russia’s Ukraine Gambit
Fears of the Chinese dragon cause neighbors to search for a longtime ally
Fifteen months into the Ukrainian war, the global fallout is reaching into every corner as well as shifting big power relationships. The only obvious loser, apart from the Ukrainian victims, is Russia itself. But what of the US, China, India?
The biggest loss for the US may well not become apparent till long after the war is over. But the use of financial sanctions against Russia and many Russians raises the zillion-dollar question: How safe is it for potentially hostile governments to hold the bulk, or even a significant portion, of their reserves or other-state related assets in US dollars? The issue is of particular concern to China as tensions with the US have risen, at least in part because of the war and President Xi Jinping’s friendly relationship with Putin.
There have already been moves to denominate trade in other currencies, not least the Chinese yuan. But shifting reserves is a longer-term issue. The yuan is not much of an alternative for now as the supply is limited and controls are still needed to maintain currency stability. But longer-term appetite for dollars may well diminish as alternatives improve at a time when the US needs to continue to borrow heavily to fund government and external deficits.
For China, the negatives are more immediate. For sure, it brought off a diplomatic coup by appearing as peacemaker between Saudi Arabia and Iran. This was made possible partly by strains between Prince Salman and Washington over oil and the murder in the Saudi embassy in Turkey of Washington Post columnist Adnan Khashoggi as well as Washington’s made-in-Israel paranoia about Iran. The Saudis are probably the largest if unintended beneficiary of western sanctions against Russian oil and gas. Nor are they just cash-rich. Ending their proxy war with Iran in Yemen should help bring Iran’s nasty ally, Assad’s Syria, back into the Arab fold.
China also found some buyers for its claims to have peace plan for the Ukraine war, despite its evident support for Putin. But these were the likes of Brazil and South Africa whose views on this matter count for little but have trade and investment issues which are helped by good relations with Beijing. China can also still get mileage out of lingering resentments of perceived US arrogance and western domination of the post-World War II institutions.
But Xi’s quasi-alliance with Putin has seriously damaged China’s relations with Europe which has proven more determined and cohesive in its support for Ukraine than Xi could have calculated – even assuming he had reason to suspect Putin’s intentions before the launch of the invasion. Stiffening European attitudes have come at a time when the appeal of the China market is under question and concerns about its technological advances are, with some push from the US, spurring efforts to protect local industries from being swallowed up by China. Of course, the French may still need to bow to Xi to sell airplanes and German companies to sell cars and capital goods, but a shift in perceptions, which was happening already, has been speeded up both by Xi and by the indiscretions of some of his diplomats who have revealed China’s actual attitudes to issues such as the (partial) break-up of the Russian/Soviet empire, an event which still haunts the leaders of China’s Communist Party.
However, it is where support matters most to China that it has lost a lot of ground – eastern Asia. The most obvious has been with the Philippines. While few expected President Ferdinand Marcos Jr to continue his predecessor’s policy of doing nothing to beyond a few words to address China’s implementation of its claims to huge areas of Philippine seas, the extension of military cooperation with the US including access to base facilities close to the Luzon Strait has been on a scale which has been a surprise to many. Marcos followed up with a visit to the US which was a reminder that the links to the former colonial power continue to be sustained by migration and other factors which trump anti-US nationalism.
Meanwhile, Japan has increased its defense spending and stepped up its own interest in the waters near the Luzon Strait. Marcos followed a visit to Washington by South Korea’s President Yoon during which he addressed a joint session of Congress which included the words: “We need to speed up Korea-US-Japan security cooperation.” US Defense Secretary Lloyd Austin has made several visits to Asia this year and provided additional US military hardware. The efforts of Japan and South Korea to set aside conflicts over history and islets can also be seen as a response to fears of China.
None of these countries may care much about Ukraine per se. But all worry about bigger and potentially troublesome neighbors with records of imperial goals. Japan and South Korea have their own problems with Russia which has long been too close for comfort. Seeing China partly align itself with Moscow has been a reminder of existing concerns about China’s intentions – not least towards Taiwan. An increase in Beijing’s rhetoric and military maneuver may not yet be cause for alarm but reminds nearby countries of the importance of their US alliance in maintaining the status quo. Taiwan may not be entirely analogous to Ukraine but both face claims based on reversing history.
Taiwan also happens to be strategically important to a whole region, and beyond, which at least partly offsets the reality that China continues to surpass the US in its influence in Southeast Asia. Trade alone makes that inevitable, especially since then-President Donald Trump walked away from the Trans-Pacific Partnership. But increased US defense interest in the region is seen as welcome, at least by the maritime states facing Chinese actions to control their seas, a factor which in military terms is linked to Taiwan’s fate. It is also noted that the US has largely sidestepped frictions with India over its purchases of Russian oil and domestic issues.
The US is relearning the need for compromises, and, as back in the 1950s and 60s rivalry with the Soviets, sometimes putting strategic issues before human rights and democracy issues. Now it needs to avoid jeopardizing India’s membership of the Quad – the informal meetings of defense minds between the US, India, Japan, and Australia aimed at counterbalancing China. The Quad is not a meaningful alliance but it is a symptom of wider spread fears of China.
For East Asia as a whole, the Ukraine war, which seemed to come out of nowhere, has raised consciousness of the threat of war. In turn that has increased military spending almost everywhere. In theory that might be seen to increase the danger of war. In practice, it may be that more countries now recognize the benefits of the status quo. China in particular may come to realize that the best way to reduce the US presence in the region is to stop upsetting that status quo and prioritizing good relations with neighbors over making the Communist Han empire even bigger than its Manchu predecessor.
Read related story: SCO vs NATO: The Struggle to Reshape the World
I don’t know at what point since World War Two that global power relationships have been stagnant. They were always shifting not for the US so-called global hegemon but because of it. Neither the then Soviet Union and post-Soviet Russia and China, nor their proxies, ever liked US geopilitical and geoeconomic primacy, although, one can argue, Dengist Chinese reforms benefitted greatly from US imports as much as Guangdong benefitted from Hong Kong capital and Xiamen from Taiwanese capital inflows. And later US MNCs followed by EU m
MNCs established manufacturing operations in China. All combined it greatly benefitted China. But US hegemony remained in China’s craw.
There are at least two connected reasons why the Chinese yuan poses little to zero threat to US dollar dominance. One is that China holds substantial currency reserves in US dollars and is happy to earn US dollars. It also holds substantial US treasuries in the form of US debt. And mainland Chinese prefer to hold US dollars than yuan, suggesting they are wary of the Xi regime’s political and economic policies.
As for US-Indo relations, Washington DC hasn’t barked at New Delhi over the latter’s arms, gas and oil imports from Russia. Why? Because DC needs India for the Indo-Pacific pact to work to push back China’s territorial ambitions, while it can’t rely on unstable, corrupt, bankrupt and snivelling Pakistan which still habors Islamic terrorists. But China is happy to embrace Islamabad and line it up for Beijing’s yuan debt dependency, not diplomacy. But there are problems with the compatibility of India’s Soviet-era arms with its coalition partners’ arsenal. And while India ramps up his defence spending and oul and gas imports bills, there are severe opportunity costs for sections of India’s industry and class and caste divided “society”.
As for Southeast Asia, its rank hypocrisy on staying “neutral” in big power contests amounts to a great sham. It fears China but wants Chinese investments and loans as much as it does US investments and US military protection. It’s caught in a pincer but that’s what Asean hypocrisy inevitably brings to its shores — self-made problems. Meanwhile, the Philippines returns to become US geopolitical dependency at the same time as Asean runs out of gas and ideas on how to solve its murderous Burmese junta problem. But Asean has always been excellent at grand pretense.
The last thing the Asian region needs is for grubby Xi and China to take military action against any of its “neighbors” over contested territories and an invasion of Taiwan. Because (a) they won’t win against China (b) they will run for US cover (c) they will be embroiled in a Sino-Taiwan war and (d) there blows the “laughable Asian Century.
PS: Sorry for any typos but puny cellphone keyboards are murder for big fingers!