Great Power Competition During a Pandemic

The coronavirus pandemic that began in China this winter has killed more than 16,000 people as of late March. The still-climbing death toll is far more than died in the 2002 SARS outbreak, and at this juncture a quarter of the estimates from the 2009 H1N1 flu epidemic. Experts expect COVID-19 will persist into the summer, and fear it may return in the fall when temperatures cool again. This is first and foremost a health crisis, but one that also has severe societal, economic, and political effects that may derail the military-forward “great power competition” narrative dominant in U.S. foreign policy circles.

China’s retail sales dropped 20 percent in January and February while the country was in virtual (and in some places actual) lockdown to halt the spread of the virus. Some estimate the Chinese economy might contract by 5 or 6 percent in the first quarter. The drop in China’s industrial output will have follow-on effects on the global supply chain for months, if not the rest of the year. This alone is causing a global economic slowdown and individual countries’ containment responses are stunting demand and economic activity as well.

Struggling economies facing unexpected shocks are also ready targets for influence by competing states.

The first European country to be struck by a significant outbreak was Italy, which has implemented a country-wide lockdown and whose medical system is overwhelmed by COVID-19 patients, forcing wrenching triage decisions. With Italy’s requests for assistance largely rebuffed by its EU partners, China responded by sending a medical team and planeloads of medical supplies (although not without cost).

This provision of aid contrasts sharply with China’s hands-off approach to its affected Asian neighbors or other struggling countries like Iran. The asymmetry makes it impossible not to view China’s assistance in geopolitical rather than altruistic terms. In 2019, Italy became the first EU nation to sign onto China’s Belt and Road Initiative. The initial deals provide China access to the ports of Trieste and Genoa and development projects. While Italy genuinely needs the medical aid, China likely saw an opportunity to simultaneously shore up its investments and perhaps fracture European unity more than a humanitarian imperative.

Adding to European disunity, Serbia’s president said in remarks that China was the only country that could provide adequate assistance for the coronavirus crisis and derided the European project as a “fairy tale.” His remarks are probably more reflective of Serbia’s deep economic dependence on China’s cash than faith in its ability to ground the global order, but their stridency suggest both the remarkable sway China is able to accumulate in smaller nations and its willingness to exercise it.

No doubt China’s efforts to be seen as a global hero in the crisis are as much to distract from the fact that it was the genesis of the pandemic as any opportunity to displace the United States in global perception. But any success China has with the latter has more to do with the United States’ failures than China’s successes. Thus far, the United States’ anemic domestic response, let alone the failure to provide assistance to other countries as it did during the Ebola crisis, has given the free world little confidence.

China has even managed to show the United States indirectly as an aid recipient. In mid-March, as the U.S. struggled to mobilize to contain the pandemic, short of supplies and dogged by the lowest per-capita testing rate of any of the developed nations affected, Jack Ma, China’s richest man, pledged to donate a million face masks and a half-million test kits to the world’s titular superpower. The first batch of supplies began arriving just two days after his announcement. As with the show of aid to Italy, the soft-power effect of these moves shouldn’t be overstated. The greater impact on global opinion may be from the contrast of even meager Chinese aid with the vacuum of U.S. global leadership and the chaos of its own domestic response, which may outlast China’s early missteps and denials that allowed the virus to spread around the globe in the first place.

Global efforts to respond to the pandemic have revealed just how dependent international supply chains are on China. China was the world’s largest producer of surgical face masks even before the state directed factories to dramatically increase output. But China used almost all those masks for domestic use, strangling the global supply as other nations struggled to contain the virus.

The pandemic may lead developed nations to retreat even further from globalization to ensure domestic supplies of critical but prosaic goods. The market for global rare earth elements, critical for high-tech manufacturing, did just that, diversifying suppliers and ending China’s virtual monopoly after Beijing enacted a de facto embargo against Japan in 2009 during a diplomatic crisis. But a true disentanglement is still unlikely. Even China can’t produce face masks by itself; its factories depend on imported raw material, especially from India, to manufacture them.

Now on top of everything else, the global energy outlook is being thrown into upheaval, first by the virus, but now stunningly accelerated by geopolitics.

The global economic slowdown and subsequent reduction in travel and transshipment caused by countries’ virus response led oil prices to plunge. After Russia and OPEC were unable to agree on measures to stabilize prices, Saudi Arabia initiated a price war to preserve its market share, and announced it was flooding the market with supply. After oscillating between $50 and $60 a barrel in 2019, a price at which many sources like U.S. oil shale and many offshore projects are barely economic, prices halved to $30, and may go even lower as the combination of reduced global demand and excess supply plays out over the rest of the year. 

The result may be structurally lower oil prices going forward and the United States may see its domestic oil industry and nominal energy independence severely hurt. The economic consequences of that, and the new dependencies it may create for the United States, are an unanticipated uncertainty in the evolving competition between it, Russia, and China. But as many renewable sources of energy are already cheaper than fossil fuels, the crisis might end up accelerating the United States’ transition away from carbon-based fuels.

For its part, Russia may be betting it can survive these low prices and keep its market share against more expensive U.S. exports. But it also likely dooms the prospect of ever exploiting its offshore oil reserves in the Arctic, which require much higher prices to be profitable. And as the global economic slowdown has led to a commensurate slowdown in shipping volume, the pandemic might also end up killing Russia’s other Arctic gamble, its alternative Northern Sea Route between Europe and Asia, intended to compete with the traditional southern routes across the Indian Ocean. 

Despite experts warning of the threat posed by global pandemics for years, the political fallout from COVID-19 is still anyone’s guess, even if the possible futures are beginning to take shape. All that is certain now is that the world will look much different at the end of 2020 than anyone guessed it might at the beginning.