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China will win the West vs Russia sanctions game, as football shows

  • Sanctions on Russia risk inadvertently supporting China’s longstanding calls for non-intervention in domestic affairs

  • Sanctions are the nuclear option in economic warfare – the West must now define when they will be used

  • Ambiguity risks economic autarky, undermines existing sanctions and could weaken deterrence against China over Taiwan

China will win the West vs Russia sanctions game, as football shows
Paul Domjan
Paul Domjan

Senior Contributing Analyst

Tellimer Research
12 March 2022
Published byTellimer Research

This is the third of a series of reports about the war in Ukraine. The first looked at the conflict’s geopolitical implications and the second at energy security. This report looks at sanctions, and future ones will explore the impact on the arms trade and the long-term repercussions of the war. 

When I retire, I am going to write a book about “—washing” and (geo)politicisation more generally. We all know about greenwashing. Techwashing – putting a fancy new label on legacy solutions or adopting a new tech approach where it isn’t needed – has been around since before the dot.com bubble. I’ve written previously about one particularly irritating form – block-washing – in which companies incorporate a blockchain or a new crypto token into a project or product that could be done equally well, and often better, with existing technology. There will certainly be a chapter, perhaps several, on sportswashing and the geopoliticisation of sport. 

I’ve previously argued that sanctions against Russia could be a direct victory for China’s attempts to create international payments mechanisms that bypass the dollar. But this isn’t China’s only victory. The fallout of Russia’s invasion of Ukraine is an inadvertent victory for China’s longstanding geopolitical argument that countries have a right to behave however they see fit within their own borders. Nowhere is this clearer than in English football. 

Sportswashing, sanctions and the morally acceptable in English football

Last year, the government of Saudi Arabia, through its sovereign wealth fund, participated in a consortium that bought Newcastle football club, giving Saudi Arabia an 80% stake in the club. Although there certainly has been tutting in the British press about human rights, the war in Yemen and the murder of Jamal Khashoggi, the general sentiment has been one of hope that Saudi cash will enable the football club to regain its past glory. Newcastle hopes to follow the meteoric rise that Gulf cash has enabled at Manchester City, which accelerated the club to the top of the league after it was purchased by Abu Dhabi United Group from former Thai Prime Minister Thaksin Shinawatra, who was unable to meet his obligations as owner because Thailand’s military government had frozen his assets. While Rwanda does not have the wealth of other authoritarian states that have directly purchased clubs, it still sponsors Arsenal’s shirt, and President Paul Kagame regularly takes to Twitter to praise wins and air his displeasure when the club loses. Rwanda’s sponsorship of Arsenal began in 2018, the same year that Russian oligarch Alisha Usmanov sold his major shareholding in the club. 

Today, Russian owners and sponsors are being treated very differently than Middle Eastern ones ever have been. Everton football club is questioning whether it will be able to complete construction of its new stadium without sponsorship from Alisha Usmanov, who switched his support from Arsenal to Everton and now has been sanctioned for his ties with Putin. Although Roman Abramovich, who owns Chelsea Football Club, has been added to the UK’s sanctions list, the government has indicated that although sanctions would impact Chelsea, “a special license” would allow the club to continue to operate. Abramovich was already seeking to sell his stake in Chelsea football club as quickly as possible, amid speculation that future sanctions could prevent him from doing so. The Saudi consortium that bought Newcastle had previously been interested in buying Chelsea. Although it seems unlikely that Saudi Arabia would purchase two competing football clubs, the buyer of Chelsea could easily be from another emerging market. 

I very much doubt that anyone would object if one of the dozens of billionaires in the Chinese National People’s Congress took the club off Abramovich’s hands. Indeed, they would not be the only Chinese owners of a Premiership club: the co-Chairmen of Fosun International, one of whom is a member of the Chinese People's Political Consultative Conference, already own Wolves. China has experienced one high-profile football sanction – Bayern Munich striker Robert Lewandowski’s decision to end his sponsorship deal with Huawei – but this is the exception that proves the rule. Lewandowski is reported to have acted in response to claims that Huawei is helping Russia secure its networks against pro-Ukraine hackers. 

The distinction between sanctions on Russia and continued openness to investment from countries that rank even lower than it on the Cato Institute’s Human Freedom Index is sharp. Not only is Abramovich selling Chelsea, but Spartak Moscow has been ejected from the Europa League (good news for RB Leipzig, who were expected to lose to Spartak). Although it’s a derogatory term, I am proud to be yid in both meanings of the word, and it’s hard to imagine any level of domestic repression in Saudi Arabia that could lead to Spurs not playing Newcastle on 3 April. I’ll be there, and I’m hoping to see Newcastle’s first Saudi-financed addition, former Spurs player Kieran Trippier, on the pitch. 

Figure 1: Many major football owners and sponsors score lower than Russia in Human Freedom

Many major football owners and sponsors score lower than Russia in Human Freedom

Now that we have nuclear-option sanctions, we need rules of engagement

There is a serious message behind this jaunt through English football. The West has rapidly implemented crippling sanctions against Russia that Putin has described as “akin to an act of war.” Although economic sanctions will never be comparable with actual loss of life on the battlefield, if this is economic warfare, then sanctions against Russia are the equivalent of Hiroshima and Nagasaki. Even since sanctions successfully brought Iran to the nuclear negotiating table, it has been clear that the West has been looking at where it can use this new weapon. More recently, the success of sanctions against Huawei, even if they may have unintended consequences in the longer term, has further strengthened their prominence in the foreign policy toolbox. 

In Russia, the West has let sanctions rip with full force, making the potential power of this weapon of economic warfare clear. The West now must clarify when and how this weapon will be used. Continued ambiguity risks both inadvertently validating other forms of repression and inhumane behaviour and injecting economic uncertainty at a time when investors and businesses have more than enough uncertainty to manage. We see both of these risks in football. Not only are Saudi Arabia’s actions being inadvertently validated, but there are surely organisations that are more important than Chelsea football club that are currently been destabilised by uncertainty about what Russian money is acceptable and for how long. 

This uncertainty will not be resolved quickly. The UK Foreign Office has already conceded that it will take months to decide which oligarchs to sanctions and impose those sanctions, and foreign property owners in London will now have six months to register their homes, creating a convenient window for oligarchs worried about potential sanctions to sell and take their money out of the UK. 

Without rules, nuclear-option sanctions risk encouraging economic autarky, undermining longstanding sanctions efforts and failing to deter China from invading Taiwan

Getting the long-term architecture for sanctions right matters for much more than football. After nuclear weapons were used against Japan, the late 1940s saw a robust debate about what role, if any, tactical nuclear weapons should have and what actions warranted a strategic nuclear response. The architecture of deterrence that debate produced helped to keep the Cold War cold and has continued to ensure nuclear safety in the post-Cold War world. We now need the same sort of architecture for the nuclear sanctions option. 

Drawing limits on the use of nuclear weapons was critical to avoid widespread proliferation. If nuclear weapons could be used at will, then many countries would seek to develop them. Setting limits ensured that low-level conflicts could progress without the threat of nuclear war and that most nations would choose not to incur the expense and potential censure from pursuing nuclear weapons. In the case of sanctions, the equivalent of the widespread proliferation is economic autarky, which Hasnain Malik already expects Russia to pursue. If the West does not rapidly develop a clear doctrine for the use of nuclear option sanctions, many countries will feel compelled to seek to insulate themselves by limiting their reliance on international trade and financing. Not only would this damage global economic integration and growth, with real human consequences (especially for the poorest), but it will also paradoxically dilute the economic role of the West and, with it, the power of sanctions when the West chooses to use them again. In the meantime, investors should expect a much more tumultuous and cautious environment, as governments, companies and investors themselves try to understand the risks of and triggers for future economic warfare. 

Meanwhile, the US’s rush to find alternatives to Russian oil risks undermining longstanding sanctions efforts against Venezuela and Iran. While one could argue that the war in Ukraine provides good reason to quickly push a new nuclear deal with Iran across the line, the same cannot be said of Venezuela. Although Venezuela has made a token gesture by releasing two imprisoned Americans, Venezuela has made no meaningful progress towards holding the free and fair elections that the US has made clear are required to lift sanctions. Letting Venezuela off the hook because the US has a bigger challenge managing Russia may be pragmatic realpolitik, but it also signals to future targets of sanctions that they can avoid reform if they can find other ways to be useful. 

Limits are also necessary to make nuclear option sanctions a credible deterrent by clearly stating what action would trigger them. The US response to the war in Ukraine has already made clear where the red lines would be in any US military support to Taiwan in the event of invasion. US action would be very limited, and the US would avoid any action that might lead to American and Chinese forces coming into direct conflict. As such, the US will focus on deterring Chinese action against Taiwan through both military support and sanctions. With respect to military support, the key near-term signpost will be whether the US finally approves the sale of an advanced Patriot air defence system to Taiwan. When it comes to sanctions, the US will need to clearly define its red lines in economic warfare, leaving no doubt that its economic response will be far less constrained than its military one.