Russian President Vladimir Putin and Chinese President Xi Jinping in Beijing, China, in 2016. (Muhammad Aamir Sumsum/ Shutterstock)
Russia, China dump the dollar as Moscow announces new trade corridors
April 24, 2024
QiOSKRussia announced this week that its bilateral trade with China has almost completely moved away from using the U.S. dollar, highlighting the two countries’ commitment to reducing their reliance on the U.S.-led economic system.
Aside from reducing dependency on the Western-dominated global currency, these ‘de-dollarization’ efforts allow Russia and China to avoid the myriad sanctions now preventing Moscow from doing business on the international market.
Western sanctions have helped lead to a boom in trade between Moscow and Beijing since 2022, rising 26% to $240 billion this year. China has also become the world’s leading importer of Russian oil.
De-dollarization isn’t the only scheme Russia is deploying to avoid crushing sanctions. Russian officials announced last week at a United Nations meeting that the Kremlin is spending billions of dollars to dodge Western sanctions by developing new trade routes in Asia.
This plan includes two new transport corridors — one that would link Russia to Kyrgyzstan via the Caspian Sea, and another that would stretch from Belarus to Pakistan. The efforts build on previous plans to redirect trade, including the North-South Corridor, a railway route first conceived in 2000 that would connect Russia to the Indian Ocean via Iran.
After years of delays, Moscow loaned Tehran 1.3 billion euros last year to build its leg of the North-South route. Sergei Ivanov, Russia’s presidential envoy for environmental issues, said that the corridor gives Russia full access to the Persian Gulf, and that “no sanctions will affect it.” The newly announced routes would similarly allow Russia to bypass sanctions and access Asian markets.
Russia and Iran have also boosted their ability to transact with one another by linking their banking systems, as both face sanctions that limit their abilities to transact with the West.
The U.S. and European countries have heavily sanctioned Russia since its 2022 invasion of Ukraine, particularly hampering the Kremlin’s ability to export oil to the West and sell it at competitive market prices. If Russia transports goods through overland corridors that are outside of the jurisdiction of the sanctioning countries, it becomes much more difficult for Western powers to interdict, noted Markus Jaeger of the Atlantic Council.
“They want to reduce the dependency and vulnerability vis-a-vis unfriendly third parties,” Jaeger said.
But if history is any guide, Russia isn’t quite in the clear yet. Sanctions on Iran, including the maximum pressure sanctions imposed during the Trump administration, played a major role in slowing the development of the North-South route. Russia is now loaning money for construction to Iran and is expected to spend approximately $3.5 billion on the project by 2030, according to Russia’s Deputy Prime Minister Marat Khusnullin.
U.S. pressure has also complicated Russia’s economic rapprochement with China, which could face consequences from the West for its support of Moscow, according to Jaeger. He pointed to U.S. Secretary of State Antony Blinken’s planned visit to China this week, where he reportedly intends to warn Chinese President Xi Jinping that Washington is concerned about Beijing’s provision of aid to Russia’s military.
Jaeger said that, as China engages more economically with sanctioned countries or entities in Iran or Russia, the risk of becoming the target of European and American sanctions will increase.
“For the U.S., imposing secondary sanctions that affect Chinese entities is seen as a very antagonistic step by China, which risks leading to further tensions in U.S.-Chinese relations,” he said.
keep readingShow less
U.S. Secretary of State Antony Blinken meets with Chinese President Xi Jinping in the Great Hall of the People in Beijing, China, June 19, 2023. REUTERS/Leah Millis/Pool
Blinken goes to China to maintain the illusion of stability
April 24, 2024
Asia-Pacific Secretary of State Antony Blinken is set to travel to Beijing this week in the latest round of high-level diplomacy between the U.S. and China.
Since the U.S.–China relationship hit new lows in late 2022 and early 2023 — thanks to incidents like then-Speaker Nancy Pelosi’s visit to Taiwan and a Chinese spy balloon’s visit to U.S. airspace — both sides have made a welcome effort to slow the slide toward crisis and conflict.
This effort has focused on top leaders exchanging views through in-person meetings. Last year, Blinken, Treasury Secretary Janet Yellen, Commerce Secretary Gina Raimondo, and climate envoy John Kerry all made the trip to China. China’s top diplomat Wang Yi and top economic official He Lifeng visited the United States, culminating in President Xi Jinping’s trip to California to meet with President Joe Biden alongside the Asia Pacific Economic Cooperation summit in November. This year, a new round of exchanges began with Yellen’s trip to China several weeks ago.
All this back and forth has been accompanied by attempts from both sides to show they are mindful of some of the other’s concerns, such as U.S. reassurances on the One China Policy, which has maintained stability in the Taiwan Strait for decades, and Chinese support for U.S. restrictions on the production of fentanyl, the drug helping to drive America’s ongoing opioid crisis. Discussions between the two militaries on crisis communications are now proceeding well after years of paralysis.
Despite these promising small steps toward reviving the relationship, however, the two sides are now in danger of complacency toward the prospect of serious conflict. As the State Department signals that no new positive initiatives are on the agenda for Blinken’s visit, U.S.–China diplomacy increasingly seems devoted to talks for the sake of talks, without any ambition to make progress on the deep and powerful underlying forces driving both sides toward confrontation.
As my colleague Michael Swaine explains in a recent research brief, the appearance of stability between Washington and Beijing is likely a product of political expediency on both sides rather than a durable foundation for coexistence. Biden, facing a difficult reelection campaign against an opponent with a predilection for making conflict with China the center of every conversation, has made the wise calculation that maintaining calm around China will help him focus on his preferred themes. Xi Jinping, for his part, is preoccupied with economic difficulties, a far-reaching anti-corruption campaign in the military, and last year’s purge of several top leaders. As the wars in Ukraine and Gaza rage on, both Washington and Beijing have reason to avoid adding another international crisis to their plates.
On the one hand, these short-term considerations reflect a deeper potential for alignment. The United States and China are both status-quo powers with an interest in limited reforms to the current global system. The dynamic economies of the two countries flourish when the global system is politically stable and increasingly connected. Both countries see clear diplomatic and economic benefits to supporting the Global South’s hunger for development.
Leaders on both sides recognize the terrible threat posed by global economic instability, large-scale forced population movements, transnational crime, pandemic disease, and the climate crisis. Because existing arrangements including the domestic institutions of both countries face these dire risks, both governments are exploring promising techniques — including industrial policy, expanded development financing, and revisions to global governance issues like business taxation and the U.N. Security Council — that could chart a path out of today’s global turmoil.
Instead of joining forces and coordinating their potentially complementary efforts, leaders on both sides are seeking to reconstitute domestic unity around efforts to repel the threat posed by the other. Rather than working together on a reform agenda, the United States has been rallying its alliance network to isolate China while China has been impugning U.S. conduct to gain favor in the Global South.
Each country sees the initiatives of the other as a challenge to its own prospects rather than a potential contribution to a stable and prosperous world. This zero-sum hostility is increasingly institutionalized in all levels of government on both sides, devoting ever more resources to and establishing ever more careers on the proposition that success on the other side means suffering and failure on “our” side.
In the last month alone, U.S. officials have attacked China’s trade with Russia and prepared sanctions to punish it; blamed the problem of weak consumer demand in the global economy on Chinese “overcapacity”; added a new “minilateral” alliance network joining the United States, Japan, and the Philippines to its complement of trilateral and quadrilateral arrangements meant to hem in China militarily; and advanced legislation that now looks likely to become law that would expropriate TikTok because of its association with China.
Also in the last month, China opened a WTO dispute claiming that the Inflation Reduction Act, Biden’s signature climate and industrial policy bill, violates trade law and established rules that will eliminate Intel microprocessors and Microsoft software from Chinese government computers and servers. In a call with Biden, Xi said that U.S. restrictions on Chinese business are second only to Taiwan in the potential for inciting conflict — a notable escalation in the urgency of Chinese warnings.
This suggests the pressures to conflict continue to build. Beijing and Washington’s current mutual interest in keeping up the appearance of stability is only temporary. The fragility of the relationship leaves open the possibility that some unforeseen event could quickly push either side to change its calculus away from détente toward conflict. Even if the short-term desire on both sides to focus on domestic challenges keeps the calm for the rest of 2024, the two countries, having squandered the opportunity to move in a new direction, are at risk of entering another escalatory spiral next year.
What could Washington and Beijing do if they wanted instead to seize this opportunity and confront the problems at the root of the U.S.–China conflict? In a research report last year, I argued that they should embrace “common good diplomacy,” a new framework for a stable bilateral relationship. Through joint efforts to build an inclusive global system, the United States and China could create the basis for genuinely healthy forms of competition and cooperation by overcoming the structural pressures for zero-sum conflict, including the exclusionary system of global authority, weak and inequitable global economic growth, and the climate crisis.
The new rapprochement routine is certainly better than a march to war — but it will not do much to avert that worst-case scenario, either. A genuine attempt at mutual understanding, recognition of shared interests, and embrace of difficult negotiations is the only path to achieving security for either country.
keep readingShow less
Shutterstock/mark reinstein
The Democrats who flipped on Israel aid, and why
April 23, 2024
Washington PoliticsThe Senate approved the national security supplemental on Tuesday night, by a vote of 79-18.
The legislation combined the four bills that were approved by the House over the weekend. After months of pushing the Biden administration to do more to pressure Israel to change its conduct in its war in Gaza, Democrats in Congress ultimately approved $26 billion in aid for Israel, including approximately $9 billion in global humanitarian aid (how much would go to Gaza, to be determined).
In the Senate, Sen. Bernie Sanders (I-Vt.) tried to introduce two amendments — one that would remove all offensive military aid for Israel and another to restore U.S. funding for UNRWA. "What we are doing today is aiding and abetting the destruction of the Palestinian people," he said on the Senate floor Tuesday night.
No Democrats, including some who have raised concerns about Israel’s war, supported Sanders’s effort, saying that they wanted the package to move forward without delay.
In the lead-up to the votes, pushback was more prevalent in the House. Perhaps most notably, on April 5, 39 voting congressional Democrats circulated a letter that urged President Joe Biden to stop sending offensive arms to Israel until an investigation into the strike that killed seven World Central Kitchen staffers was completed.
In addition, the members also urged Biden “to withhold these transfers if Israel fails to sufficiently mitigate harm to innocent civilians in Gaza, including aid workers, and if it fails to facilitate — or arbitrarily denies or restricts — the transport and delivery of humanitarian aid into Gaza.”
On Saturday, 37 Democrats (along with 21 Republicans) voted against the Israel aid bill — a significant total given the history of bipartisan support for Israel in Congress. But the large majority of the caucus, 173 in total, voted to advance it (3 Democrats did not vote).
Of those in support, 20 of the members had signed that letter to Biden earlier this month.
Securing another tranche of aid for Ukraine has been a long-term policy priority for the party, and some Democrats may have been willing to swallow more aid for Israel as a price for accomplishing that goal. But the vote over the weekend gave Democrats an opportunity to follow through on their rhetoric and vote against sending Israel more military aid without compromising any other piece of legislation.
But many Democrats nonetheless retreated from the line they had set earlier this month. Signs of a shift in rhetoric from some of these members came in the aftermath of Iran’s strikes on Israel on April 13.
“Iran is a terrorist nation. They have just launched a disproportionate terrorist attack against our ally Israel. The free world and the United States will stand against this terrorist nation and the tyranny that it promotes,” said Rep. Sheila Jackson Lee (D-Texas) on X on the night of the attacks. “We must pass Biden’s supplemental appropriation funding now that covers Israel, Ukraine, and Gaza among others.” This followed her signing of the April 5 letter urging Biden to hold aid.
Others stayed noticeably quiet following the exchange of attacks between Iran and Israel, but their calculus on aiding Israel clearly changed between April 5 and last weekend.
“I will always support our allies against enemy attacks — especially with potential nuclear threats. Iran’s attacks against Israel necessitated that we approve the emergency aid package without delay,” Rep. Alma Adams (D-N.C) told RS on Tuesday. “I additionally chose to do so because it provides for over $9 billion in humanitarian aid. I trust that President Biden will ensure this aid is dispensed to those most severely impacted by this conflict.”
Rep. Jahana Hayes (D-Conn.), told RS that the Iran attacks changed her calculus as well. “Earlier this month, I signed a letter asking President Biden to withhold offensive weapons until there was an investigation into the airstrike that resulted in the death of seven World Central Kitchen humanitarian aid workers. I still maintain that any funding the United States provides to our allies must be used in accordance with international law,” she said.
“The situation changed when Iran launched an attack against Israel and further escalated tensions in the region," she added. "Providing aid to our allies around the world, including Israel, is of vital importance to our national security. This does not negate the need for assurances of how aid will be used. The national security supplemental I voted for last week ensures Israel has the resources to combat Hamas and provides crucial humanitarian aid to vulnerable people around the world, including the civilians in Gaza. We can and must continue to do both."
Eight of the 20 signatories who eventually supported the bill have not issued public statements about their votes, including Reps. Jackson Lee, Adams, and Reps. Rosa DeLauro (D-Conn.), Nanette Barragan (D-Calif.), Zoe Lofgren (D-Calif.), Tony Cardenas (D-Calif.), and Robert Garcia (D-Calif.)
Four others, including Pelosi, as well as Reps. Anna Eshoo (D-Calif.), Sylvia Garcia (D-Texas), and Hayes (D-Conn.) released statements celebrating the passage of the series of national security bills without explicitly explaining or justifying their positions on Israel aid. Pelosi’s office published a transcript of her floor speech on Ukraine aid but did not mention Israel.
“Speaker Pelosi has a long record of strong support for Israel and its right to defend itself. Speaker Pelosi signed the April 5 letter to call for a pause on offensive weapons transfers until there was an independent investigation into the attack on the World Central Kitchen heroes, steps the administration has taken and is taking,” a spokesman for Pelosi told RS, explaining her vote. “Speaker Pelosi’s position is fully consistent with her vote in favor of the Israel Security Supplemental Appropriations Act.”
Three other Democrats — Reps. Betty McCollum (D-Minn.), Madeleine Dean (D-Pa.), and Kevin Mullin (D-Calif.) issued short statements emphasizing the $9 billion in humanitarian aid, some of which will go to Gaza — but not mentioning or explaining their support for the military assistance to Israel.
Besides Adams, Hayes, and Pelosi, none of the other members who did not clearly state their rationale for the vote responded to requests for comment.
Avoiding an explanation of controversial votes is nothing new for Democrats.
“The GOP mentioned the country in the title of its press release and sixteen times in its summary of the bill. But the House and Senate Democrats’ press releases don’t mention Israel at all,” Stephen Semler noted in Jacobin when Congress passed a $1.2 trillion funding bill that included almost $4 billion in military assistance for Israel and cut off all funding for UNRWA, the most important supplier of humanitarian aid in Gaza. “Clearly, Democratic elected officials were afraid to cop to the contents of the bill.”
The other six members who voted for the aid package explained their decisions more clearly to the public.
Reps. Jan Schakowsky (D-Ill.) and Sara Jacobs (D-Calif.) explicitly criticized the inclusion of funds that Israel could use for offensive weapons, but said that the defensive aid for Israel and the humanitarian aid present in the bill were necessary.
“While I have deep concerns about the bill that includes additional security assistance to Israel, the funding in this bill is urgently needed to address the worsening humanitarian crisis in Gaza,” said Schakowsky. "I am concerned by the inclusion of $3.5 billion in funding for Israel that could be used to obtain offensive weapons. While this funding will not be disbursed to Israel for several years, I reiterate my calls for the U.S. to halt all offensive weapons transfers to Israel until and unless it can be confirmed that U.S. weapons are being used in accordance with domestic and international law and that the Israeli government is not impeding the entry of U.S. humanitarian aid into Gaza.”
“While I’m deeply concerned about further military assistance to Israel, I couldn’t in good conscience vote against this lifesaving humanitarian assistance when millions of people around the world are suffering,” added Jacobs.
Reps. Jared Huffman (D-Calif.), Paul Tonko (D-N.Y.), Veronica Escobar (D-N.Y.), and Melanie Stansbury (D-N.M.) all supported the measure but urged Biden to keep pressure on Benjamin Netanyahu to follow international law and protect civilians during the war. Stansbury paired her statement on the supplemental’s package with a letter she wrote to Biden saying that she understands “that the funding provided in the supplemental is defensive in nature and will not be used to support offensive weapons in Gaza.” The legislation earmarks approximately $3.5 billion for buying “advanced weapons systems.”
Escobar said that her “support for the Israel package comes with [her] continued calls on the administration to use its leverage with Israel to allow more life-saving humanitarian aid to enter Gaza.”
Democrats who opposed the measure on Saturday made the case that taking the rare opportunity to register clear, widespread opposition to weapons packages like this one is how opponents of funding Israel’s war can provide Biden with the necessary leverage to push Netanyahu.
“I hope this vote will show the world that there is a really significant segment of the United States that doesn’t want to see expanded and widening wars,” Rep. Greg Casar told the New York Times before the vote.
Following the vote, a group of 19 Democrats who voted against the aid issued a statement stating, in part: “Today is, in many ways, Congress’ first official vote where we can weigh in on the direction of this war. If Congress votes to continue to supply offensive military aid, we make ourselves complicit in this tragedy.”
keep readingShow less
