The gamble taken by Vladimir Putin with the invasion of Ukraine upsets commonly accepted geopolitical truths. The same goes for the response across the Atlantic, and particularly for their impact on financial flows. The effectiveness of sanctions and the risks of economic decoupling had been subject to ongoing debates. China may have thought it could enjoy the benefits of commercial and financial interdependence while challenging the liberal world order and Asia-Pacific security. Its support and continued trading with Iran had never been called in question. No one could have imagined financial measures so drastic that they deprive Russia of most of its foreign exchange reserves. No one anticipated that so-called market democracies would strike a key aspect of globalization, even in response to an aggression straight out of the previous century. The lesson is that despite American conflict fatigue or Europe’s attachment to the longest peace in its history, unprecedented sanctions can still take place. And even if Russia’s GDP is roughly that of a large Chinese province, the strategic impact for China of a Russian collapse would be infinitely more important. In the other direction, the meeting between Jake Sullivan, Biden’s national security adviser, and Yang Jiechi, China’s top diplomat in Rome today is likely to put a price on any support by China to Russia.
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