Tag: Russia

Last month, Russia and China declared that their friendship had “no limits.” But since Russia launched its attack on Ukraine, that friendship has been strained. As the war has gone on, China has sought to distance itself from Russia to avoid the same financial sanctions and economic isolation that has rocked Russia in recent weeks.

Most recently, China’s top envoy to Washington went as far as to pledge his country “will do everything” to de-escalate the war in Ukraine, but refused to condemn Russia’s attack. 

Following President Joe Biden’s meeting with Chinese President Xi Jinping March 18, international business experts John Horn and Patrick Moreton at Olin Business School offered their perspectives on the developing situation, the challenges facing China and what impact its actions could have on the Chinese and global economies.

China is watching closely

All along, China’s stance in the conflict has been more anti-American than pro-Russian, said Moreton, professor of practice in strategy and management and academic director of the Olin’s MBA Global Immersion program.


“China’s official narrative on Ukraine reflects their dissatisfaction with the position the U.S. has taken on issues that they consider core interests, including Taiwan, Xinjiang and Hong Kong—to name just three—and a general chafing at what they consider the American outsized role in the global political and economic system,” Moreton said.  

“I would expect that these are some of the issues that will come up when the U.S. and China sit down to discuss Russia and Ukraine.”

Horn, professor of practice in economics, agrees.

“My sense is that China is looking at this not as a communism versus the rest of the world construct, but rather as China versus the rest of world construct—what’s best for China,” Horn said.  

Like many countries, China likely thought Russia’s invasion of Ukraine was going to be a very short-term effort. If this had transpired, and Russia did not face strong pushback from other countries, Horn said China could have interpreted that as an opportune time to militarily take control of Taiwan.  

But much to Russia’s chagrin, the situation has not played out as expected, putting China in a tricky position.

What’s at stake for China?


“From China’s perspective, Russia’s attack on Ukraine, if successful, could have provided an increased opportunity for China to partner with western Europe as a trade alternative to the United States, if the latter had been seen as unable to use its leadership position to prevent the Russian aggression,” Horn said.

Moreton added, “There is also the possibility that China sees considerable opportunity in the current crisis and may very well be asking the U.S. and the European Union for concessions on issues it considers important in exchange for a particular response to Russia’s request for help.”

It’s a delicate balance for China, though. The Chinese government and businesses are acutely aware of how Russia’s actions have decimated its international business and trade and want to avoid the same fate. While China is Russia’s No. 1 trading partner, China relies more heavily on trade with the European Union and the U.S.

Beyond financial and economic implications, there are also serious reputational issues at stake both outside of and inside of China, Moreton said.

“The fact that the Chinese people aren’t being allowed to see what is happening in Ukraine seems to me to be a clear indication that the Chinese leadership sees a legitimacy problem at home if it supports Putin and it becomes widely known just how wrong his invasion and conduct of the war has been,” Moreton said.  “The Chinese people are not indifferent to the suffering of others, and they, like most Americans, expect their government to conduct itself in a moral manner.”

From a global perspective, Horn said, “The Chinese government appears to be playing this situation in a way that at the end, China is stronger than where they were a month ago relative to the United States, relative to Western Europe.

“And while a successful Russian invasion could have drawn into question the U.S. role as a global leader, the fact that the majority of countries have followed the U.S.’ lead with economic and trade sanctions, and that there hasn’t been a backlash toward the U.S. more broadly, makes that potential goal harder to achieve,” he added.

What is the best approach to working with China?

Moreton said it’s important for Americans to recognize that each country has many different types of interests, some of which are familiar and others that are quite different based on culture, stage of development, regional and global security, etc. 

“In that regard, I think it’s important for Americans to recognize that what we think is right or wrong may not appear so to China and vice-versa,” Moreton said. “This doesn’t mean we acquiesce to these interests. Rather, it simply means that countries trying to work with China have to try to understand their interests and offer a set of carrots and sticks that resonate productively with China’s interests and are consistent with the country’s values.”

But imposing economic sanctions on China is likely not on the table, in part because it would be too politically risky for the Biden administration Moreton said.

“The fractured nature of the American body politic makes harsh sanctions on China like what we have imposed on Russia very hard to pull off politically,” he said. “There are plenty of political and media opportunists who will jump on an opportunity to beat the Biden administration about the head for the inevitable disruptions that this move will have. To pull it off right now would require a level of political leadership beyond what I’m seeing in our political system.

“That’s not to say that more selective sanctions like we currently have aren’t possible, though.”

Photo: Russian President Vladimir Putin meets with Chinese President Xi Jinping. (Image: Shutterstock)

Russia is facing a financial meltdown. In response to its invasion of Ukraine, the U.S. and global allies have hit Russia with financial sanctions, isolating the country from the global financial system. In particular, the penalties on Russia’s central bank have effectively frozen the vast majority of its foreign-held assets.

The unprecedented scale and unanimity of these penalties will be crippling to the Russian economy, according to Mark P. Taylor, dean of Olin Business School and the Donald Danforth Jr. Distinguished Professor of Finance.

But what does this all mean? And what affect might these sanctions have on the global economy today and in the future? Taylor, a leading global authority on international finance, answered these questions and more.

What does it mean to freeze a nation’s assets?

According to Taylor, freezing a nation’s assets is very similar to freezing an individual’s bank account. The money is still there and may even earn interest, but the account holder — in this case, the Russian government and wealthy oligarchs — cannot access it.  


While it’s difficult to get a full handle on just how much Russian money is held outside its borders, Taylor said there is evidence that Russia has stockpiled over $600 billion in foreign currency reserves. The vast majority of that is frozen. Among the countries where Russia holds the bulk of its foreign reserves, only China has not imposed sanctions on Russia to date. 

“On top of that, there are other sanctions on individuals and corporations,” Taylor said. “For example, Russian individuals have approximately $11 billion in deposits in Switzerland, a major financial center, right now. And that’s bank deposits. That does not include securities and bonds. The true number could be five times that — like $50 billion — just in Switzerland. That money is frozen.”

‘It’s a new form of economic warfare. No one wants to go to conventional war with Russia, but this will definitely impact them severely.’

Dean Mark P. Taylor

Historically, the government, Russian businesses and wealthy oligarchs have chosen to hold their assets in foreign banks because the currencies are less vulnerable than the ruble, Taylor explained.

Making matters worse for Russia, the country also has been cut off from SWIFT — a platform for facilitating money transfers that is integrated into banking systems worldwide — making international payments difficult.

“Initially, people thought Russia would route payments through China,” Taylor said. “But that’s not happening, interestingly. There’s no evidence that Russians are circumventing sanctions by going through China, possibly because Chinese banks are worried about sanctions as well.”

How have these sanctions impacted Russian, global economies?

The effect of these penalties on the Russian economy has been severe and immediate. The ruble and stock market are down 30-40%, Taylor said. Russians are lining up at banks and ATMs to withdraw their money. And it will be increasingly difficult for Russia to import necessities with a large percent of its assets frozen and no way to make international payments.

Russia’s biggest trading partners, India and China, are still willing to trade with the country, Taylor said. But many companies throughout Europe had already stopped purchasing and selling to Russia since the sanctions imposed on the country when it invaded Crimea in 2014.

Globally, the biggest concern is the impact these sanctions will have on energy prices and how that might contribute to inflation.

“Russia is the biggest producer and supplier of oil and natural gas to Europe in particular,” Taylor said. “Prices were already high and have gone up even more since the start of the conflict. This will have an impact on global energy prices and so have a ripple effect beyond Europe and will also be felt in the U.S., for example.”

If the energy price hikes are sustained, it could exacerbate inflation. Faced with higher energy bills, households will have less money to spend elsewhere. And businesses will be forced to raise prices in response to the higher energy costs. But we’re not there yet, Taylor said.

“People are panicking at the moment. A lot of the energy price hikes depends on what happens in the conflict. If the price increases do not last for long, it will not have a significant impact on trade and inflation. The pain will be tolerable,” Taylor said.

A new form of economic warfare

Financial sanctions are not new, of course. In recent years, the EU and U.S. have imposed financial sanctions on Myanmar and Belarus, for example. What makes this situation different, though, is the near global unanimity in which they have been applied, Taylor said. The G7 — the U.S., Canada, Germany, France, Italy, the U.K. and Japan — plus Switzerland and the EU more broadly have acted in unison to isolate and punish Russia.

While many were surprised that Switzerland broke its neutrality, Taylor sees the situation differently. “What does it mean to be neutral? If virtually the whole world is lining up to say this act of aggression is wrong, then agreeing with that doesn’t necessarily mean you’ve broken neutrality,” he said.

According to Taylor, the unprecedented unanimity in these financial sanctions on Russia is one of the few positive things to come out of the conflict. And it could change the way global powers respond to threats in the future. China, for example, will be keeping a close eye on the situation.

“These types of sanctions would not have been effective during the Cold War because the Russia and the whole Soviet bloc was largely a sealed, communist economic area. Today, however, Russia is a capitalist economy that relies on global trade and international finance, making them more vulnerable to sanctions,” Taylor said.

“It’s a new form of economic warfare. No one wants to go to conventional war with Russia, but this will definitely impact them severely.”

Today, the International Association of Athletics Federations (IAAF) upheld its ban on Russia’s track and field teams, rendering them unable to take part in the in the Rio de Janeiro Olympics.

The suspension of Russia’s track teams first came in November, after a report from the World Anti-Doping Agency alleged widespread cheating. Today, the IAAF followed up on the initial suspension, ruling that Russia had not done enough to earn the right to compete.

Patrick RIshe, incoming director of Olin's Sports Business program

Patrick Rishe

While the International Olympic Committee (IOC) has the final say on a ban, Patrick Rishe, director of the Sports Business Program at Washington University in St. Louis’ Olin Business School, says today’s move illustrates the economic effect of cheating in sports of all kinds.

“While the IAAF’s decision to ban Russian track and field from Rio is a grand statement, it certainly is not surprising in light of Russia’s inability to sufficiently curb cheating,” Rishe said. “Though cheating still occurs in sports that have tried to become clean (e.g., baseball), the economic lesson to be learned is that if you raise the price of cheating (through greater suspensions and other financial penalties), the incidence of cheating will fall.”

Rishe predicts today’s ruling from the IAAF could have a lasting impact as the fate of the Russian athletes now rests with the IOC.

“Baseball has seen reductions in cheating, and perhaps with the weight/gravity of this hammer thrown by the IAAF at Russian athletics today, this may have a longer-term impact on the incidence of cheating across all Olympic sports worldwide. Only time will tell,” Rishe said.

By Erika Ebsworth-Goold

It’s another far-reaching global sporting scandal: On Nov. 9, the World Anti-Doping Agency recommended the International Association of Athletics Federations (IAAF) suspend Russia from athletics competition in the wake of its findings regarding that country’s ongoing cover-ups of positive performance-enhancing drug tests in its track and field athletes.

“I don’t claim to be an expert in the various advances in testing methods and procedures. But when you consider the Ben Johnsons and the Marion Joneses of the world, you realize that doping scandals have been part of the recent past with respect to track and field,” said Patrick Rishe, PhD and director of the Olin Business of Sports Program.

The findings were presented in Geneva, Switzerland. For an international sporting scene still reeling from FIFA fallout this summer, it’s another embarrassment that could have ramifications of Olympic proportions: the ruling could keep Russian athletes out of Rio de Janeiro next year.

“What this shows is that when you have these organizations, individuals, or processes which receive little external checks-and-balances, opportunities arise for corruption,” Rishe said. “FIFA has proved this to be true. The world of cycling has suffered from this stigma mightily. So too again will track and field.

“Over the long run, one wonders how this will impact ratings and sponsorship of Olympic Games. Because if the public’s confidence in the legitimacy of the outcomes is frayed, their interest will wane … and with fewer eyeballs, corporations will be less bullish on sponsorship investments,” Rishe said.

By Erika Ebsworth-Goold, WUSTL Newsroom