John Sitilides: A new era of great power rivalry intensifies geopolitical turmoil

John Sitilides, geopolitical and geoeconomic analyst, who has provided consulting to the State Department since 2006, talks to Capital.gr about the geopolitical environment shaped by Russia's aggressive war against Ukraine, the responsibilities of the West in the course of it, but mainly to the role the US has played in the exponential rise of China, which now emerges as its main economic competitor. Mr Sitilides is also principal of Trilogy Advisors LLC, Washington.

By Agis Veroutis

Mr Sitilides thank you for being available to give us a top-level view of the state-of-the-world today and how it appears to be shaping into the future. Could you give us the current picture of the world in light of recent developments with the Russo-Ukrainian war? In which manner could all this have been avoided if at all? 

The debate about how to have avoided or prevented Russia’s invasion of Ukraine will play out for years to come, with much blame being accorded to Moscow of course, but also to Kyiv, Washington, London, and other governments whose policy errors and overall hubris led to a series of miscalculations dating back to Putin’s 2007 Munich Security Conference speech and the 2008 NATO Summit in Bucharest. The current outlook is highly uncertain, given what we expect will be Russia’s long-term isolation from Western financial markets and mechanisms and the consequential effects of its energy export diversification to Asia and other non-EU markets. We will know better by early 2023 how deeply severe food shortage shocks may affect northern African and Middle Eastern societies and citizens, with the potential for social unrest that ten years ago toppled several governments across the southern Mediterranean region.

We will also have a clearer picture by spring next year of the damage done by Europe’s strategic blunder of legislating net-zero emissions commitments without first developing an independent and resilient energy infrastructure grid that assures several hundred million Europeans of a secure power baseload. Until then, we are gravely concerned about the possibility that millions of citizens of various European countries will be much hungrier, colder, and poorer this winter, and that these conditions may repeat, for the worse over the next several winters as Europe scrambles to secure liquefied natural gas contracts that extend out as much as twenty years, which requires the rethinking of these overly ambitious and unrealistic net-zero emissions commitments that are paving the way for the outright de-industrialization of major sectors of the EU economy.    

How do you believe Europe and NATO are faring in this conflict and what, if anything, could have been done differently? 

Without substantial U.S. military support for the Ukrainian military, Kyiv would have likely surrendered early into the invasion. Through early October, Washington has pledged more than 52 billion euros in military, financial and humanitarian aid to Ukraine since the invasion began. In that same time, EU institutions have provided a combined 16 billion euros. In addition, the United Kingdom has provided 6.5 billion euros, and Germany and Canada just over 3 billion euros each. According to the Kiel Institute for the World Economy, the United States is committing nearly twice as much as all EU countries and institutions combined. This subdued European contribution is especially shocking given that the Ukraine war is taking place on the eastern border of the $17 trillion GDP bloc. The European members of the NATO alliance must be able to demonstrate a more serious and concrete approach to self-defense and continental security against the perennially disruptive Russian threat if Europe expects to be perceived as an influential actor on the world stage. At this point, Vladimir Putin seems not to take Europe seriously, only the U.S and its massive arms deliveries to Kyiv which he most likely did not anticipate in his invasion planning. 

What was the US role in widening the gap between Russia and Ukraine, leading from Russia being the guarantor of Ukrainian security in Ukraine’s Nuclear Disarmament treaty of 1994 to Russia’s occupation of Crimea in 2014 to all-out war in 2022?

In retrospect, many American, Russian, and European policy errors are discernable. There is considerable debate about whether Russia could ever truly have become an integrated Western country, given its distinct civilizational history of the past one thousand years. Yet NATO and the EU sought to establish various types of partnership arrangements with Moscow starting in the early 1990s. At the same time, Russia’s efforts to achieve a modicum of political and economic normality in the turbulent decade after the collapse of its bankrupt communist rule are repeatedly distorted by corrupt Russian former apparatchiks and newly-minted business executives, as well as by American contractors with little knowledge of Russia who achieved little in advancing the country’s pathway to free-market democracy. These troubled conditions helped open the door to Putin’s 1999 ascendance to power. He did offer to partner with the U.S. to crush radical Islamist terrorism in the aftermath of the September 2001 attacks against the U.S., and he facilitated American military basing in Afghanistan and several former Soviet republics in nearby Central Asia. But he felt that Russia was perpetually denied the respect it warranted from the U.S. and Europe, especially the constant NATO refrains for Ukrainian and Georgia membership that the alliance knew would cross Putin’s red lines.

In a 2008 diplomatic cable to then-Secretary of State Condoleezza Rice, then-U.S. ambassador to Moscow and current CIA Director William Burns wrote that "Ukrainian entry into NATO is the brightest of all red lines for the Russian elite (not just Putin). In more than two and a half years of conversations with key Russian players, from knuckle-draggers in the dark recesses of the Kremlin to Putin’s sharpest liberal critics, I have yet to find anyone who views Ukraine in NATO as anything other than a direct challenge to Russian interests.” Burns added that "NATO enlargement, particularly to Ukraine, remains an ‘emotional and neuralgic’ issue for Russia,” and that it was "hard to overstate the strategic consequences” of offering Ukraine NATO membership, which, he predicted, would "create fertile soil for Russian meddling in Crimea and eastern Ukraine.” That same year, Putin invaded Georgia in open rejection of the U.S.-led rules-based international order. In 2014, he annexed Crimea and launched a hybrid invasion of eastern Ukraine after Kyiv’s pro-Moscow president was expelled from office by domestic opponents. None of this justifies the February invasion of Ukraine, but retrospection allows for considerable blame for repeated blunders to be distributed widely across Russia, Ukraine, Europe, and the United States. 

How do you think this war will end, and when? Could there be a nuclear strike within the European continent? Could you project this war’s probable impact to the world’s power balance?

No one knows how the war will end, or if it ever will. I expect there will be some end to the kinetic dimension of the war, and that can return in cycles for many years to come, but Russia and Ukraine will surely remain enemies for the near future. Even if a ceasefire is achieved, one can easily envision Russia or Ukraine violating it to secure additional territorial or military objectives. And as long as Russia possesses a tactical nuclear weapons arsenal that is specifically deployed to achieve targeted gains on the battlefield, there is a possibility, however remote, that such weapons could be used. It is imperative that Western diplomats find a way to bring Moscow and Kyiv to the negotiating table to bring an end to military hostilities, to prevent the accidental escalation of this conventional war to a condition that leads to a hostile nuclear detonation, however relatively small. That is a threshold that no responsible leader should ever want to see crossed, and it could bring unbearable pressure on Washington and Brussels to retaliate with a massive conventional strike on Russian forces in the Black Sea or within occupied Ukrainian territory, in turn provoking an escalatory response from Russia. The threat of a direct U.S.-Russia war over Ukraine is not impossible to contemplate, however catastrophic the outcome that could result. For the U.S., there are no vital American interests at stake that warrant a potential nuclear showdown with Moscow.

Seemingly, the BRICS club with more than 40% of the world’s population has found a renewed role and raison d’etre. With countries such as Turkey and Iran exploring the possibility of becoming BRICS members, how do you anticipate its role in a future world?

BRICS is a simple acronym for developed and emerging markets that play politically and economically outsized influential roles in their respective regions. At the same time, it is difficult to envision a significant formal alliance or network of Brazil, Russia, India, China, and South Africa, or even Iran, NATO member Turkey or other secondary powers such as Nigeria, Mexico, Saudi Arabia, and Indonesia, which affects global markets or international relations in an enduring or inordinate manner. In this new multi-polar era, in which the U.S. and China are increasingly engaged in strategic competition in nearly every major sector of diplomacy, trade, technology, and security, individual countries may enter into tactical partnerships or arrangements that serve or advance distinct national interests. But just as the era of seamless, "just-in-time inventory” globalization is increasingly an artifact of the recent pre-lockdown past, so will countries become more nationalist in their diplomatic strategies, and more protectionist of their economies, seeking to maintain cordial relations and trade ties with both the U.S. and China as best as their geopolitical conditions permit. 

The US single-handedly created China’s economic miracle, forcing its accession into the World Trade Organization during the Clinton Administration, transferring technology know-how and manufacturing capacity from the US soon afterwards, and forging special treaties to levy import duties & tariffs of Chinese-made products all the while. In doing so the US effectively rescued the Chinese Communist Party from collapsing, as the USSR did during the Bush Administration. In retrospect, has this strategy worked to the benefit of the US and the world, or by taking these actions the US created it is most hardcore adversary ever in the global arena?

The historically industrious Chinese people were destined to grow wealthier after Deng Xiaoping directed the Communist Party to encourage private enterprise and wealth accumulation. After the collapse of the Soviet Union, Deng understood that the Communist giant would remain vulnerable to internal collapse without economic power, which Moscow never achieved under communism. Washington’s original intention was to encourage China’s continued liberalization in the belief that economic progress would eventually lead to demands for political freedom, and that the Communist Party would give way to a more open and consensual form of governance that would render the Asian colossus less threatening or intimidating to its smaller neighbors. The strategic miscalculation, among the greatest diplomatic blunders in modern history, was that the rigidly Leninist Communist Party of China would ever willingly surrender absolute control over all aspects of China’s economy, society, military, and civic culture.

The "peaceful rise” that Deng encouraged, and that endured through the next twenty years of leadership in Beijing under Jiang Zemin and Hu Jintao, was utterly overturned by Xi Jinping early in his tenure, and formally so at the recent National Party Congress. In recent years, we have seen not only the open sharing of U.S. technology and knowledge with China, especially under lucrative agreements financed and brokered by major Western financial firms, but also the outright theft of as much as $600 billion annually in U.S. intellectual property rights. One need only to observe Chinese airplanes and military vessels, among many major hardware examples, to recognize these are carbon copies of American industrial leaders. There may be no other glaring instance of a global power willingly enabling, empowering, and fortifying the economic growth and military might of its chief adversary to this degree as has the U.S. In fact, Beijing may have already opened a new "Cold War II” phase of international relations with Washington and its allies marked not by the Kantian peace of which so many Europeans have dreamt, but of traditional great power rivalry that has historically marked relations between great empires and other powerful societies throughout centuries, perhaps millennia, of human history.

How do you project US-China relations faring in the future, and what is the gist of Sino-Taiwan tensions? What is the true risk exposure of the US losing access to the foundries of 70% of its 5-7 nm top microprocessor technology?

In August, the world witnessed a furious volley of missiles, rockets, heavy artillery and other major weaponry around and over the island of Taiwan, after Speaker Nancy Pelosi’s visit provided the pretext for an aggressive show of force at what is a regularly scheduled series of Chinese military exercises in the Taiwan Strait. This reflects a puzzling aspect of Xi’s leadership style. He delivered a speech in January 2019 openly stating that Taiwan must accept its eventual fate as a mere province of China, ideally peacefully, by military force if necessary, before 2049, which would commemorate the centennial of the Chinese Communist Party’s takeover of mainland China. But as the semiconductor competition between the U.S. and China intensifies, Beijing may view the window of opportunity narrowing to take over Taiwan. This would further risk Beijing ever establishing global leadership in manufacturing the most advanced microprocessors that Taiwan manufactures but which China is years away from achieving on its own. Taiwan manufactures about 65 percent of the world’s semiconductors and almost 90 percent of the most advanced chips.

The Taiwan Semiconductor Manufacturing Corporation stands about a decade ahead of all its competitors, American and Asian, in advanced chip production. Washington this past summer enacted the CHIPS Act to further subsidize chip manufacturing in the U.S. Just a few weeks ago, the U.S. Commerce Department effectively cut off Chinese access to advanced U.S. chip technology, under new and more severe restrictions that are part of a broader U.S. effort to cut China off from the rest of the world in leading-edge chip supply chains. The Biden Administration has also blocked U.S. persons, both citizens and permanent residents, from supporting the development or production of a class of high-end chips that could advance Chinese tech applications from artificial intelligence to supercomputers to military use.

None of this is intended to convey that Beijing plans to blockade Taiwan anytime in the near future. Again, the strong preference on Xi’s part, and that of the Chinese Communist Party, is to avoid any kinetic conflict that can result in great damage to China’s economy. The party has essentially been left to rule the country and dominate its politics in a social contract that provides for economic growth for a growing segment of China’s 1.4 billion citizens. The party has largely delivered over the past three decades, at least to the several hundred million Chinese who have entered the middle class, though 600 million Chinese citizens still subsist on about five euros a day. Beijing is far more interested in persuading Taipei to submit to China’s overwhelming power and influence peacefully. One key to that strategy is to deny the United States the ability to credibly come to Taiwan’s defense in the event of a standoff between Beijing and Taipei. The U.S. has long maintained a policy of strategic ambiguity regarding Taiwan’s defense. Washington is obligated under the Taiwan Relations Act of 1979 to provide weaponry to help Taiwan defend itself against an external threat. But no presidential administration has ever publicly disclosed whether it would defend Taiwan against a Chinese attack. President Biden has on four occasions since January 2021 stated that his administration would defend Taiwan, resulting in harsh diplomatic retorts from Beijing and immediately being walked back by anonymous White House officials.

Regardless of whether strategic ambiguity makes sense as tensions over Taiwan worsen, the U.S. posture is critical not only for Taiwan but for many of its Asian allies. If Japan or South Korea were to perceive Washington security assurance as unreliable, they may each adopt a more muscular posture against China, including the development of independent nuclear arsenals that Beijing – and possibly even the North Korean regime - would seek to prevent from ever being deployed. Washington also enjoys a mutual defense cooperation agreement with the Philippines, an archipelagic state located east of the South China Sea’s international waterways through which one third of the world’s annual commerce traverses. The U.S. also has strong defense and trade ties with Indonesia, another archipelagic state south of China which exports oil and gas, minerals, palm oil and rubber products, and which controls a series of strategic maritime chokepoints connecting the Pacific Rim to the Middle East and Europe. A U.S. failure to effectively defend Taiwan could collapse the entire security framework of Asia, rendering some of the important economies in the world in capitulation to belligerent Chinese dominance. 

How do you anticipate technological progress and innovation affecting the global power balance in the coming decades?

Even as it comes under increasing threat of a Chinese military invasion or sovereign takeover of some type, Taiwan’s most important trading partner is China, accounting for a quarter of Taiwan’s total trade. The U.S. is a distant but rising second largest trading partner, at just under 13% of Taiwan’s trade. Despite the growing hostility emanating from Beijing in the past decade, all these Asian economies are determined to maintain robust trade ties with China’s massive market and superior factory floor infrastructure. They are also balancing their diplomatic relations with a Biden Administration that continues to seek ways to restrict Beijing’s access to breakthrough technologies that can dominate the global economy in the decades ahead. The CHIPS Act provides $53 billion to boost U.S. technological competitiveness against China, alleviate incessant chip shortages, and incentivize domestic manufacturing of advanced semiconductors, especially because the U.S. economy remains overwhelmingly dependent upon vulnerable Taiwan for its most advanced semiconductors.

The White House is also promoting an international network of semiconductor manufacturers to establish greater resilience against China’s growing capabilities and to decelerate its growth in leading technologies such as quantum computing, artificial intelligence, robotics, and the Internet of Things. Under the so-called CHIP4 network, the U.S., Japan, Taiwan, and South Korea would collaborate to reorganize the global semiconductor sector’s supply chains. Each country has a vital leadership role to play in the global chip market. The U.S. leads in designing, tooling, and marketing semiconductors. Taiwan is the world leader in semiconductor manufacturing, with over 60 percent of the world’s chips being manufactured by Taiwan’s top two companies. Japan dominates the production of critical manufacturing equipment and materials, and South Korea, led by Samsung, is a world leader in both design and manufacturing capability. But officials in Seoul worry about another round of harsh Beijing sanctions as were imposed in 2016, when South Korea agreed to deploy defensive U.S. anti-missile systems. China remains the largest market for South Korean semiconductor companies, and together with Hong Kong for about 60% of Seoul’s $125 billion semiconductor export market. Japan would have to lift controls on strategic chemicals it imposed on South Korea in 2019 due to historical disputes dating back to the Second World War. South Korea is still primarily focused on the continuous military threat from North Korea, which has been escalating its missile tests in recent weeks. Japan and South Korea are reluctant to engage at a governmental level with a formal grouping that includes Taiwan, which itself is dependent upon China for many of the raw materials they use to manufacture chips. As a result, the four countries have yet to finalize plans for a preliminary meeting more than one year after the White House proposed the CHIP4 initiative.

Xi and Putin are expected to meet again at the G20 summit in Indonesia later in November, which President Biden is also slated to attend, but there are still no confirmed meetings with either Xi or Putin. Biden has made clear he will not meet with Putin at this time to launch any Ukraine negotiation, and Xi is signaling he does not want to meet with Biden, given Beijing’s anger at the Commerce Department’s chip ban and other measures to constrain China’s technology sector. Moscow and Beijing continue to enhance their energy and trade ties, as Russia has now surpassed Saudi Arabia as the largest crude oil supplier to China. Russia has also boosted its coal exports to China to their highest levels in a half decade, at discounted rates as the EU markets diminish. Beijing is also purchasing far larger quantities of Russian commodities and military hardware, and Moscow is consuming far greater quantities of Chinese microchips, printed circuits, electronic components, and raw materials. Though many of the Chinese exports have military applications, Beijing has been careful not to violate the letter of the Western sanctions on Russia’s defense industrial base. But Moscow and Beijing have begun their joint effort to undermine the strength of the petrodollar. Russia’s state energy company Gazprom and China’s National Petroleum Corporation have agreed to allow the use of rubles and yuan to pay for Russian natural gas supplies to China. The newer agreement follows the February contract worth over $115 billion for Russia to sell China vast quantities of natural gas for the next thirty years. Moscow will increasingly look to Chinese financing to complete such long-term projects, deepening its dependence on Beijing as it redirects much of its colossal energy export sector away from Europe.

Any last thoughts you would like to leave us with?

Even an accelerated timetable to build out additional renewable energy resources within Europe to achieve the net-zero emissions targets is likely to fail, as solar and wind infrastructure cannot be built fast enough and at sufficient scale to replace oil and natural gas. The intermittency of these renewables when there is a major gap in hydrocarbon baseload power sourcing, especially when the sun does not shine and the wind does not blow, further complicates Europe’s medium-term energy dilemma. Brussels officials have yet to formulate a bloc-wide plan for expanded or new renewable grid infrastructure, which in turn will likely face local opposition that slows down approvals and causes project bottlenecks. Political leaders can approve fast-tracked planning and permit-granting to build solar and wind power projects, but those require enormous land use, sometimes as much as three hundred times larger for industrial solar and wind farms than for natural gas or nuclear plants. The projects may require harmful species and habitat impacts that sacrifice environmental health and trigger well-organized environmental opposition. European democratic institutions will need to balance these net-zero goals with the preservation of local residents’ democratic rights to question and challenge such large infrastructure projects. 

These unresolved bureaucratic hurdles will be further compounded by the surging material input costs for many of the materials needed to build solar farms, wind turbines, and batteries. Most of these materials are manufactured in China, which also controls a large share of the global market for processing critical metals such as cobalt, lithium, and rare earth elements needed for cleaner energy production. In effect, Europe will be replacing its current hydrocarbon dependence on a hostile authoritarian Russia with its future renewables dependence on a hostile authoritarian China. At the same time, despite the throttling of natural gas flows into Germany via the Nord Stream 1 and 2 pipelines, recently damaged by underwater explosions, Moscow is still shipping more than forty million cubic meters of Russian gas through Ukrainian pipelines to European markets every day, providing Ukraine substantial transit fees, and another twenty five million cubic meters across the Black Sea to Turkey, some of which continues to southeastern European countries. 

Europe’s substantial domestic woes are weakening its stature as a global power. Its leaders have adopted policies that render the EU vulnerable to the machinations of adversarial powers, and to autocratic regimes in Qatar, Azerbaijan, and Algeria. Massive social intervention expenditures will make it even more difficult for EU countries to keep their commitments to bolster their self-defense capabilities, increase their military budgets, and provide additional weaponry and financial assistance to Ukraine, all while expanding the renewables and natural gas infrastructure grids for the continued transition to net-zero emissions. Therefore, Washington will continue to decide the fate of Europe’s security for the near future. And as the European Union enters an existential phase that will determine the viability of the bloc, the U.S. grapples with the reality of a post-globalized, multipolar world after nearly three decades of unrivaled American power. 

Both Russia and the U.S.-led coalition supporting Ukraine are committed to winning the war. Moscow is unlikely to voluntarily surrender the Ukrainian territory it currently occupies, nor is Kyiv willing to accept a deal that allows Russia to occupy its territory. Crafting an agreement where both sides save face is nearly impossible for the near future. Therefore, Russia’s protracted assault on Ukraine will likely roil European economies and global markets far into 2023 and beyond.

At the other end of the Eurasian landscape, a more self-confident and coercive China, perhaps weaker internally than President Xi can ever reveal, poses the greatest strategic threat to the global economic system. China’s continued decoupling from Western markets and technologies is countered by its expanding trade and security relations with Russia. China and Russia are together steadily intensifying their challenges against the U.S.-led system, to create a new international system that promotes their interests and inoculates them against Western legal standards.  

Looking ahead, the central question remains whether the U.S. or China will determine the technological, economic, political, and diplomatic standards and values of the international system in this era of renewed great power politics. Washington and Beijing each pursue policies of strategic disengagement on matters of national security, advanced technology, and societal well-being. Reviewing the White House’s National Security Strategy released in October, one sees an agenda over the next two years that will focus less on the unrealistic prospect of improving relations with China and more on stabilizing what remains of the relationship, to avoid further deterioration. The U.S. may find itself competing with China for partners on different policies and objectives, without formal alliances or networks, from secondary and tertiary powers worldwide. The one thing certain is that the new era of international politics and economics will be defined by diplomatic and military operations at a pace unseen since the Cold War ended, marking the return of traditional great power rivalries in international relations, albeit under 21st-century identities. Managing the geopolitical turbulence ahead will be the diplomatic imperative of national leaders among the world’s most powerful rivals.

Mr Sitilides, thank you for taking the time out of your busy schedule to discuss these subjects with me and give our readers a bird’s eye view of things to come. I hope to have an opportunity to discuss with you again in one of your future visits to Greece.

It will be my pleasure. Thank you for this opportunity to share my perspectives with your distinguished audience.

Short Bio: John Sitilides is Principal at Trilogy Advisors LLC in Washington, D.C., where he manages a diversified federal government affairs portfolio specializing in a) delivering exclusive geopolitical risk reports, webcasts, and related products and services to institutional capital markets, industrial leaders, and retail clients, b) upholding federal private property rights protection and environmental regulatory relief for American citizens and companies, and c) managing professional development of U.S. diplomats posted in Greece, Turkey, and Cyprus under a federal government contract with the U.S. State Department since 2006. 

He explores the complex geopolitical and geo-economic decisions that impact U.S. foreign relations with the world’s leading powers and Washington’s commercial relations in major markets in Asia, Europe, the Middle East, and worldwide, helping corporate executives, investment managers, and civic audiences better understand, anticipate, and mitigate risk.

Disclaimer: This interview reflects Mr. Sitilides’ own personal opinions, and in no way reflects the State Department or the U.S. government in any capacity.

[You can connect with John Sitilides via LinkedIn. His Twitter handle is @JohnSitilides]