Valdai Club

On November 18, 2019, the Valdai Discussion Club presented a report, titled “Asia Under Fire of US Sanctions.” Ivan Timofeev, programme director of the Club and the author of the report, said in his speech that when it comes to sanctions, we usually think about Russia, Iran and North Korea, but now the US is starting to focus its punitive economic measures on China. The most important precedent here is the Huawei case, but to what extent is it indicative? Is the confrontation between the US and China systemic? Is it possible to reverse it and is it worth waiting for the end of the sanctions? The participants discussed these and other questions.

Until recently, sanctions against North Korea offered the key precedent for their use in Asia; the UN adopted 10 resolutions in connection with nuclear missile tests. The author of the report emphasised that the only legitimate sanctions are those agreed upon by the UN Security Council, although there are unilateral measures taken by other forces – the United States, the EU, South Korea and Japan. An important innovation mentioned in the report is the secondary sanctions imposed by the United States against companies and individuals for violating the UN sanctions. For example, a number of companies from the Chinese city of Dandong were subjects to such sanctions for their violation of sanctions against North Korea, which, however, did not have serious political consequences.

Much more significant are Chinese precedents. According to Timofeev, they are connected with the violation of sanctions against Iran: these include the companies ZTE and Huawei, which allegedly supplied to Iran devices with American components inside: if in the first case there were fines, while the second became politicized and led to a scandal. However, the small number of these cases and their dynamics allowed the expert to offer an optimistic conclusion: “In my opinion, it is too early to say that US-Chinese competition has become irreversible,” he said. “The Chinese are trying to resolve issues themselves and are not using any political leverage: they are trying to distance themselves from political problems. That is why Huawei claims that it’s not necessary to take revenge on Apple. In addition, the Chinese rarely get fines: out of 205 studied cases, the Chinese ones only account for four. Politicization of these issues poses serious risks for China, but the situation is quite reversible and it has room for manoeuvre.”

Dmitry Kiku, Deputy Director of the Russian Finance Ministry’s Department of External Restrictive Measures Control, noted in his speech that the unilateral measures used by the United States against North Korea, Iran and China are in line with the Trump administration’s foreign policy. At the same time, according to him, “if earlier China was considered as America’s economic rival, then since 2018 – and especially after updating the US nuclear doctrine, it was regarded as the main strategic military opponent.” Washington will also continue attempts to engage Beijing in negotiations on medium- and shorter-range missiles, which so far have been rebuffed. Therefore, in the future, according to Kiku, restrictive measures will be only tightened. “In connection with the North Korean nuclear programme, it should be noted that unilateral American measures are often associated with the direct decisions of the UN Security Council, which is not always true,” Kiku said. As an example, he cited the case of the Russian Hudson shipping company, which fell under sanctions due to its ties to North Korea. “We could not get detailed information on this case from the Americans. This year, a report in the Security Council said that the Hudson did not violate any resolutions, which caused great displeasure. A kind of double standards is evident: sometimes, with evidence and its transfer to the Security Council, sanctions are effective, and sometimes not.”

“The situation with China is a repetition of the situation with Japan in the 70s, when it experienced the so-called “lost decades,” said Eldar Murtazin, Leading Analyst of Mobile Research Group and Editor-in-Chief of Mobile-Review.com. At the time Japanese electronics were the most advanced, which posed a threat to the United States’ leadership status. The same thing is happening now with China: it invested a lot of money and effort in 5G and AI, and Huawei is the largest telecommunications company in the world. The US is trying to slow down its development and give a carte blanche to its own companies, they are trying to catch up and overtake China. This caused a negative impact on Huawei, but the company is so large that it continues to grow and this cannot be reversed because Huawei controls key technologies.”

According to the expert, the US attempts to put pressure on private companies, particularly following the arrest of Huawei’s CFO are unprecedented. The corporation was charged with espionage, but no factual evidence was found, and Apple and other American giants came into confrontation with the authorities. “Corporate America is not on the side of politicians in this war,” Murtazin said. “They want to do business, politicians forbid it. However, globalisation is such that it is unrealistic to produce anything in only one country: 40% of Huawei components are manufactured in the USA. Now China has taken a wait and see attitude. When the foam leaves, it will continue to work, but sanctions will remain for a long time,” the expert concluded.

The last in the discussion was Wang Yiwei, Director of the Institute of International Affairs and Centre for European Union Studies at Renmin University of China. According to him, only the UN Security Council sanctions are legitimate, while US unilateral measures are illegal and mean an attempt to fight globalisation. “Huawei has made it very clear that it is ready to share 5G technology with the US government, but will use its systems to do what it wants,” he said. “Now the USA is blocking Huawei, which harms the 5G system. The whole world will suffer from these unilateral sanctions, because force will be used against other companies, so we must jointly make efforts against them.”

“China will seek independence, and any sanctions against China will only make the country stronger and more independent,” the speaker said. “In addition, it harms the reputation of the United States, because you can’t just impose sanctions on foreign companies: this is a violation of international law and UN principles. The next US administration will have to think about it. ”