On Sept. 20 the US imposed punitive measures against China's military under the 2017 Countering America’s Adversaries Through Sanctions Act (CAATSA), in retaliation for its purchases of Russian military equipment. The move is meant to “punish” Moscow for what American officials call "malign activities." The State Department slapped sanctions on China’s Equipment Development Department (EDD) for having purchased the S-400 air-defense system and Su-35 combat planes. This is the first time anyone has been sanctioned for doing business with Russia in violation of CAATSA.
The announcement came a few days after Chinese troops participated in Russia’s largest war games since 1981, which demonstrated that Russia and China are now working more closely with each other. The announcement of sanctions seriously angered Chinese authorities, who threatened to respond in kind. And they will.
Washington’s move changes little in regard to its relationship with Beijing, as it had already launched a war of tariffs against it. This is all at a time when the tensions in regard to the disputes in the South China Sea over islands and maritime claims are running high.
The sanctions war is pouring even more fuel on the fire. It raises the prospect of the US sanctioning its friends and allies who purchase Russian military equipment. The penalties imposed on Sept. 20 are a warning shot intended for other states on the list of clients, including India, Egypt, Turkey, Saudi Arabia, Morocco, Algeria, the United Arab Emirates, Qatar, and the Philippines, among other nations that are willing to sign contracts. India, the largest buyer of Russian-made weapons, and Turkey, a US NATO ally, have already been admonished against doing business with Russian arms exporters. Russian President Vladimir Putin is going to visit Saudi Arabia soon. The planned signing of an S-400 deal would deal a major blow to the United States. Washington hopes that now that sanctions have been imposed on Beijing, Riyadh will change its mind.
Obviously, the sanctions are intended to ”poison” Russia’s entire economy, in order to scare off existing and potential partners . The hope is that they’ll be hesitant to make any deals because “with Russia, you never know.”
It’s important to get rid of one’s rival. Russia is the second-largest arms exporter in the world, with a 23% share of the global arms market. By comparison, the US controls 33% , then there is China with only 6.2% and France with 6%. Last year Russia exported $15 billion worth of weapons to customers in 53 countries. Arms sales are a lucrative business and it’s crucially important for Washington to hold on to its leadership in that area, in the face of challenges. Any move can be rationalized if it will weaken the positions of one’s biggest competitor. Added to that is the fact that Russia’s defense programs are much more efficient that those of the United States.
Some countries, such as China, India and Iran, are standing up to this pressure, but other potential buyers of Russian equipment might back down. So far, the policy has seen widespread resistance, triggering a pushback against the US use of its enormous financial power. Even the Philippines is vowing not to change its plans to buy Russian weapons.
There is another consequence the US administration does not appear to be thinking about. Last year, 15% of US liquefied natural gas (LNG) exports went to China. That area of trade has a promising future. China is set to top Japan as the world’s biggest natural-gas importer next year. With demand set to grow, China has already started to curtail LNG imports from the United States, opening up a new front in the ongoing trade war. The largest energy consumer is reducing imports at a time when the United States has several large-scale LNG export facilities under construction. This is a serious blow to America’s ambitions to become a global energy superpower. Cheniere Energy, Sempra, and Kinder Morgan will suffer. A major market will be lost and it’s hard to see how such a policy is in keeping with the goals of the “America First” strategy.
Russia will not waste this opportunity. In July, a ship from Russia’s Novatek natural-gas producer delivered the first-ever liquefied natural gas (LNG) cargo from the Yamal LNG project to China via the Northern Sea Route (NSR), a route that makes it possible to drastically cut delivery time to Asian consumers.
Can the European market make up for this loss? Not a chance. US LNG is at least 20% more expensive than Russian pipeline gas. Because of many factors, the prices continue to fluctuate. Last year the price of Russian gas piped to the German border was $183 per thousand cubic meters. The average spot price at TTF, a European gas-trading platform, was $188, without factoring in transportation costs. The price of US LNG that is shipped to Spain, Portugal, and Turkey is about $245. Europeans are pushing back against the US policy of arms-twisting. Besides, the infrastructure for substantially increasing LNG supplies is not there. The existing capacity is insufficient.
Here is another consequence worth mentioning. This month, a new US cyber-strategy was made public. Unlike the previous strategy issued in 2013, this document authorizes the use of “offensive cyber operations.” In reality, it just confirms the fact that cyberspace has become a new domain of warfare. Although the guns are silent, a world war is being waged. The US policy leaves other nations with no choice but to form alliances to counter America’s offensive operations. Russia and China are just another example of how countries are joining together to repel the common threat coming from North America. Nobody wanted this war but the US attacked first.