Face-to-face dialogue "Where is the growing superpower rivalry taking us?"

Alicia García Herrero and Mira Milosevich

On 6 June 2022, the Rafael del Pino Foundation organised a face-to-face dialogue in the Rafael del Pino auditorium. "Where is the growing superpower rivalry taking us? Order or disarray in global security and economics". in which the following participated Alicia García Herrero and Mira Milosevich.

Alicia García Herrero is a Senior Research Associate at the Elcano Royal Institute, Chief Asia-Pacific Economist at NATIXIS, Senior Fellow at Bruegel and Non-Resident Research Fellow at the Emerging Market Research Institute of Johnson Cornell University. She is currently an adjunct professor at the City University of Hong Kong, and a visiting professor at the University of Science and Technology (UST) and the China-Europe International Business School (CEIBS). Previously, Alicia García Herrero has been Chief Economist for Emerging Markets at BBVA, member of the Asia Research Programme at the Bank of International Settlements (BIS), head of the International Economics Department at the Bank of Spain, member of the Executive Board of the European Central Bank, head of Emerging Economies in the Research Department of Banco Santander and economist at the International Monetary Fund. With a PhD in Economics from George Washington University, she has published numerous books and articles in specialised academic journals.

Mira Milosevich-Juaristi is a Senior Research Fellow at the Real Instituto Elcano and Associate Professor of Russia's Foreign Policy at the Instituto de Empresa (IE University). She holds a PhD in European Studies from the Complutense University of Madrid and a Diploma of Advanced Studies in the area of International Public Law and International Relations from the same university. She holds a degree in Sociology and Political Science from the University of Belgrade. She has taught postgraduate courses in Political Science and International Relations in the Doctoral Programmes of the Instituto Universitario de Investigación José Ortega y Gasset.


On 6 June 2022, the Rafael del Pino Foundation organised the dialogue "Where is the growing rivalry between Superpowers taking us? Order or disarray in global security and economics", with the participation of Alicia García-Herrero, chief Asia-Pacific economist at NATIXIS and Mira Milosevich-Juaristi, senior researcher at the Real Instituto Elcano and associate professor of Russia's Foreign Policy at the Instituto de Empresa.

For Mira Milosevich, the Ukrainian war is the result of two failures. The first is Russia's failure to try to influence Ukraine with non-military instruments. When it saw that it was unable to exert influence, it decided to invade the country. The second failure is the West's and Ukraine's own failure to dissuade Russia from attacking. By saying publicly that the West would not get involved, it gave the Kremlin the wings to plan an invasion.

Every conflict has three levels, political, strategic and tactical. Regarding Russia's political goals, it has given up the goal of changing the government and controlling the whole of Ukraine with a puppet government or by occupying the whole country. In this it has failed. On the strategic level, Russia continues to shell weapons depots and attempts to demilitarise Ukraine, but has pushed the offensive in the southeast with the aim of blockading its ports and stifling Ukraine's economy and most of its exports. At the tactical level, we have overestimated Russia's military capabilities. Russia is now advancing slowly, but it is advancing in the south-eastern part of Ukraine and it will not easily give back what it has conquered.

At this point, both actors believe they can win the war, so it is going to be a protracted war, based on a balance, in the sense that Russia will hope that the West will break its unity and the West will hope that sanctions will weaken Russia so much that it will be forced to stop the war.

The world is moving towards two blocs: the West and the rest. In the rest there are many differences between countries

According to Alicia García-Herrero, since before the war, China has wanted to change the rules of the game in the world and knows that there is a loved and hated neighbour, Russia, that wants to do the same, that has a certain military power in nuclear weapons and not so much in conventional weapons, that can take the first step. Why is this good for China? Because it is a forerunner of something China wants to achieve, but it doesn't cost it anything. It doesn't cost it to have sanctions imposed on it because that is very expensive for it. Despite the narrative, China is going to comply with sanctions. At a minimal cost, it has that front line of confrontation with the West. Russia is an instrument of weakening from China's perspective, especially if the war is a long one.

The West holds the key to the solution here. The West is not only the West, but also Japan, South Korea and Australia. This goes back a long way, and Japan has imposed sanctions on semiconductor exports to Russia before. Singapore is there, trying to survive, and India is double-dealing, it has reappeared. Xi Jinping announced the global security initiative on his home turf a few weeks ago in Boao, China's Davos. In doing so, he is trying to bring the group that is not part of the West together, with China at the centre supporting Russia. The BRICS are in this game because they have Russia, Brazil and South Africa. India has a key role in supporting or not supporting this initiative. India is silent on the issue and plays this double game. But it has already understood that it cannot be part of this league. Hence the importance of the Indo-Pacific partnership. Xi Jinping tried to avoid the meeting of democracies in Washington. At the first one only Singapore went, and at the second one they all went to say what's mine. Asia is lost. This is already a tally of alliances, who has more weight in these alliances. The West plus Japan, South Korea and India and, on the other hand, those who have expressed interest in the global security indicative are Cuba, Syria, Uruguay. There are a number of paramilitary and security interests that are driving this. The West has to react immediately and urgently, otherwise the balance will shift.

Xi Jinping does not talk about security in Davos, but about trade relations, investment, but now he talks about security. Biden understands that Asia is not about trade, but about needing US security, but Asean has the economy with China and security with the US. So Xi offers security and the alliance with Russia confirms that. He can now offer that because he understands that Russia will end up at his feet. Then there are other motivations like Taiwan, or the sense of greater security, but that is defensive. But there is something else here because some steps are taken before the war starts. It's this idea that the West is done with always making the rules of the game. Biden is offering Asean and India an economic pact because otherwise it is impossible for countries with obvious economic development needs to put security first, especially after the Covid scars. The direct investment coming into India is going to be brutal, some of it fleeing China and some of it realising that it is no longer the right time to go to China.

We have inflated China's technological capacity. China has an R&D expenditure of 2.2% of GDP which is lower than the US and South Korea and at the level of Europe. Of that, only 6% is basic research, which is much lower than Europe. Two thirds of R&D is carried out by state-owned enterprises with a lot of discards, i.e. much of this R&D is not R&D at all. In some areas, they have made great strides, but there are a number of limitations related to the nature of the regime. The incentives to succeed in R&D are not the same as in a market economy, which creates distortions. These Chinese incentives are increasingly perverse. We have seen this with the pandemic. China is not a market economy. Something as important as avoiding contagion in the pandemic, which was based on something as basic as accepting vaccines that could have been replicated, but the mere fact of saying that this vaccine was Western stopped it and cost points and points of GDP. Someone who is willing to pay this price for ideological reasons cannot unseat a market economy. Where it can help sustain the regime, such as artificial intelligence, development is better because the incentives are alienated.

Xi Jinping tells Europeans that they have to keep pushing for strategic autonomy. This means depending on China. Am I going to be more independent without the United States? Is importing gas from the United States a problem? In Taiwan we see the risk of invasion every day. Do we want that situation for Europe? We cannot fool ourselves, we are not autonomous. If we wanted to be autonomous, we should have designed Europe differently. If China listens to you, it pushes you towards it because it suits it. We don't have the instruments, we don't have the military, energy or technological capacity in the relevant new technologies. We have to accept a reality that we cannot change in 2022, which is when the war is.

The invasion of Taiwan is a greater risk to the global order than Ukraine because it is the gateway to the Pacific. Japan without Taiwan is lost. The US ambiguity on Taiwan is generated by Clinton. It was the time when American companies wanted to enter China and so he accepts that ambiguity. It is the stopgap that saves the situation in the short term, but it creates a time bomb in the medium term and goes against a legal document, which is the commitment to defend Taiwan, and puts the Philippines or Japan, whose agreements with the United States are not very different, at risk. The rest of Asia accepts this ambiguity because it suits them. The Taiwanese are the main investors in China. What Biden is doing is reminding us that there is a contradiction in Taiwan policy and reminding us of it now because it is a note of caution to China.

On 1 June, China stopped implementing the Covid zero policy. It could happen again at any time. The consequences of the confinements are very serious. The Chinese economy has been in a severe recession. It is a rare shock. China has not been importing since March. The idea is that whatever they can replace they replace to create growth. The shock is not over because China cannot open up, there is no herd immunity. China's fiscal situation is very tough and economic welfare is shrinking, wages are rising less, there is more unemployment. That is why the shock is so big. When China exports a third of the world's intermediate goods, if its ports are closed and the inflationary pressures generated by bottlenecks arise, we have a huge shock, but it is shrouded as if in a haze. China's closure to the world is a global shock of gigantic dimensions.

What could the West do to make the rest of the world understand that the problem is not sanctions but Russian imperialism? It should make it clear that the West did not create this problem. It should also use its strategic reserves. China is making a big mistake because it has huge strategic reserves. One wonders why. The fear is that China will say it solves the problem with its strategic reserves and get countries on its side. The West should do that before China does. It has to take steps to make it look like it is solving the problem. Neither does China because it is immersed in its internal discourse, in an internal power struggle because the Chinese private sector fears a more closed regime.

The Rafael del Pino Foundation is not responsible for the comments, opinions or statements made by the people who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their sole responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio González, are the result of the debates held at the meeting held for this purpose at the Foundation and are the responsibility of the authors.

The Rafael del Pino Foundation is not responsible for any comments, opinions or statements made by third parties. In this respect, the FRP is not obliged to monitor the views expressed by such third parties who participate in its activities and which are expressed as a result of their inalienable right to freedom of expression and under their own responsibility. The contents included in the summary of this conference, written for the Rafael del Pino Foundation by Professor Emilio J. González, are the result of the discussions that took place during the conference organised for this purpose at the Foundation and are the sole responsibility of its authors.