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ECONOMIC WARFARE   

This year has witnessed growing tensions and escalations of conflict that can, at times, be described as avoidable. Russia’s incursion into neighboring Ukraine, for example, has become a destabilizing force in ways that were not clear for both opponents and proponents of Russia’s actions. Another potentially dangerous incident this year in August was the visit to Taiwan by the third most powerful political figure in the United States of America (USA). This trip to Taiwan by the US Speaker of the House of Representatives has been widely criticized as utterly provocative to China and perhaps unnecessary. The purpose of that visit did not appear to propose a mutually beneficial peace between Taiwan and China. 

For now, China has resolved to remind he world – and Taiwan- of its military force but without surging into Taiwanese territory as Russia did in Ukraine.  Taiwan and China are neighbours in the same way Ukraine and Russia are neighbours. Further, China is the world’s second largest economy from the USA while Russia ranks eleventh according to International Monetary Fund (IMF) data. The US economic value is over $25 trillion; China is over $ 14 trillion, and Russia is about $1.7 trillion while Taiwan’s economic value is $850 billion.  Interestingly, the US appears antagonistic towards China and Russia while showing support for Taiwan and Ukraine respectively. 

China holds almost $1.2 trillion of US Treasury bills and exported agriculture commodities to the US in excess of

$4.6 billion in 2017 alone.  Infact, the Food and Agricultural Organisation (FAO) 2021 report (The State of Food and Agriculture 2021. Making agri-food systems more resilient to shocks and stresses) ranks China and Russia as second and third foremost exporters of essential agriculture commodities such as soy and wheat. Additionally, China and Hong Kong   imported almost 30% more from Taiwan than the US in 2021.  It means that Taiwan depends more on income from China than it would from the US. This means that both China and Taiwan would not be genuinely interested in conflict that disturbs lucrative commerce.  Their uneasy peace appears to work for the two nations. 

It may be hard to believe that these same countries causing tension, the United States, Russia (former nerve center of the Soviet Union), China and the United Kingdom (UK) ensured the end of the Second World War in 1945. That this power of unity among strong nations possibly became the template by which to articulate international peace. Indeed, these same countries became the founding permanent members of the United Nations (UN) Security Council. Consequently, this security council became the anchor for ensuring that nothing at the scale of a world war ever occurred. 

In fact, the UN Charter in Chapter Five (5), when describing Functions and Powers of this Security Council in

Article 24 confirms that ‘In order to ensure prompt and effective action by the United Nations, its Members confer on the Security Council primary responsibility for the maintenance of international peace and security, and agree that in carrying out its duties under this responsibility the Security Council acts on their behalf.’

This Charter is a detailed and sensible document with its own flaws but remains the best attempt of normalcy and avoidance of deliberate conflict among nations. Be that as it may, Russia and the US, despite their commitment to world peace have foremost sent their troops to fight in countries beyond their borders in defence of their respective national interests. Throughout all these conflicts, the two military superpowers of the modern age Russia and the US rarely engaged in open and direct conflict. There was a sense of mutual respect until, arguably, the fall of the Soviet Union in the late 1980s and early 90s. 

Two other things appear different in this renewed conflict: firstly, the US and its allies have forced their influence too close to Russia’s borders by urging Ukraine to join (NATO) and fastrack its inclusion into the (EU) free market. This directly undermines Russia’s economic influence because the EU has its own trade rules which may not favour Russia when it seeks to buy and sell in Ukraine. 

The second and more significant outcome of this conflict has been the willingness of Russia and China to avoid using the US currency as a means of trade for various lucrative commodities that are not bough t from the US, such as oil and gas, among others. This also undermines the economic influence of the US its currency is the most traded and therefore earns most of its income outside American borders. 

INTERNAL USE ONLY

INTERNAL USE ONLY

The combined economic values of both China and Russia may not equal the strength of the US economy for now, but these nations are positioning themselves to undermine the US currency in an unprecedented manner. If they succeed, this will redefine the international financial architecture. It is a new tit-for-tat that may cause nations to revisit the UN Charter and rewrite the rules so that justice is not defined by a few privileged nations. Incalculable lives have been lost in these and other confrontations and one can only speculate what the end game will be from the ongoing Russia Ukraine as well as the impending standoff between the US and China which equally has potential to escalate into deepened economic warfare.

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