January 28, 2025 - 1:15pm

Since the beginning of the Ukraine war, the ineffectiveness of Western sanctions on Russia has become increasingly clear. The same is true of US sanctions against China — especially the Biden’s administration’s ban on high-performance semiconductors and, more recently, on graphics processing units (GPUs). The foreign policy community, illiterate in matters of economics and finance, massively overestimated the effect such sanctions would have, as the measures rely on the idea that China’s rise is based entirely on US technology.

The response to Chinese AI company DeepSeek and its destabilisation of US tech stocks in recent days demonstrates how this strategy has backfired. Advocates for sanctions still argue that they will have an effect, if only we wait long enough. Yet the very opposite is true. The longer that sanctions are applied, the more likely it is that countries will find ways to circumvent them — or in the case of DeepSeek, simply outsmart them.

Since at least the turn of the millennium, Beijing has been crowding in on the so-called Stem subjects (science, technology, engineering and mathematics), with American and British universities particularly popular among Chinese students. China has its own highly competitive university sector that is also heavily focused on these subjects — media studies seems to be of lesser interest.

The West maintains a few inherited advantages. Patented proprietary technologies exist to protect. But as the car industry has now found out, this works until it doesn’t. China was previously ineffective at producing semiconductors, as recounted by Chris Miller in his book Chip Wars. But this was only a snapshot, rather than a detail from which to extrapolate. Since the various restrictions imposed by the US on ASML, Europe’s most important tech company, China has been improving its production capacity. With talent, money and natural resources, why wouldn’t the country succeed eventually?

Sanctions are not only failing to accomplish their task: they are actively counterproductive. DeepSeek, as a product of a sanctions regime, needed to develop its own system — and choose a route that was more efficient and less costly than the one taken by the US. It is the unintended side effects of sanctions which should concern us. They caused economic shifts in Western countries for which those governments were unprepared. The Russia sanctions were a factor in the deindustrialisation of Germany and, by undermining Olaf Scholz’s governing coalition, in the rise of the AfD.

Perhaps the most disastrous geopolitical effect, though, is that they pulled China and Russia into a new anti-Western strategic alliance. America and Europe must now reckon with a coming multipolar order, in which global influence is spread more evenly beyond the old powers. The game, it would appear, is over.

This is an edited version of an article which originally appeared in the Eurointelligence newsletter.


Wolfgang Münchau is the Director of Eurointelligence and UnHerd columnist.

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