Exclusive-U.S. weighs China sanctions to deter Taiwan action, Taiwan presses EU

© Reuters. A globe is seen in front of Chinese and Taiwanese flags in this illustration, August 6, 2022. REUTERS/Dado Ruvic/Illustration

By Ben Blanchard, Yimou Lee, John O'Donnell, Alexandra Alper and Trevor Hunnicutt

TAIPEI/FRANKFURT/WASHINGTON (Reuters) -The United States is considering options for a sanctions package against China to deter it from invading Taiwan, with the European Union coming under diplomatic pressure from Taipei to do the same, according to sources familiar with the discussions.

The sources said the deliberations in Washington and Taipei's separate lobbying of EU envoys were both at an early stage - a response to fears of a Chinese invasion that have grown as military tensions escalate in the Taiwan Strait.

In both cases, the idea is to take sanctions beyond measures already taken in the West to restrict some trade and investment with China in sensitive technologies like computer chips and telecoms equipment.

The sources did not provide any details of what is being considered but the notion of sanctions on the world's second-largest economy and one of the global supply chain's biggest links raises questions of feasibility.

"The potential imposition of sanctions on China is a far more complex exercise than sanctions on Russia, given U.S. and allies' extensive entanglement with the Chinese economy," said Nazak Nikakhtar, a former senior U.S. Commerce Department official.

China claims Taiwan as its own territory and last month fired missiles over the island and sailed warships across their unofficial sea frontier after U.S. House of Representatives Speaker Nancy Pelosi visited Taipei in what Beijing saw as a provocation.

Chinese President Xi Jinping has vowed to bring democratically-governed Taiwan under Beijing's control and has not ruled out the use of force. He is set to secure a third, five-year leadership term at a Communist Party congress next month. Taiwan's government strongly rejects China's sovereignty claims.

Responding to the news on the sanctions package, a foreign ministry spokesperson in Beijing warned against underestimating China.

"I want to emphasize that any country or person should not underestimate the strong determination and firm will of the Chinese government and people in defending national sovereignty, territorial integrity, and realising the reunification of the motherland," the spokesperson, Mao Ning, said on Wednesday.

Officials in Washington are considering options for a possible package of sanctions against China to deter Xi from attempting to invade Taiwan, said a U.S. official and an official from a country in close coordination with Washington.

U.S. talks over sanctions began after Russia invaded Ukraine in February, but took on fresh urgency after the Chinese reaction to Pelosi's visit, the two sources said.

The United States, backed by NATO allies, took a similar approach to Russia in January with a threat of unspecified sanctions but this failed to dissuade Russian President Vladimir Putin from launching his invasion of Ukraine.

The White House is focused on getting countries on the same page, including coordinating between Europe and Asia, and avoiding provoking Beijing, the non-U.S. official said.

Reuters was unable to learn details on what specific sanctions were under consideration, but some analysts suggested China's military could be the focus.

"Big picture, initial sanctions conversations will likely revolve around curtailing China's access to certain technologies required to sustain a military operation against Taiwan," said Craig Singleton at the Foundation for Defense of Democracies.

The White House declined to comment.

Taiwan's Foreign Ministry said it had discussed China's recent war games and the "great challenges" China poses to Taiwan and the region with the United States, Europe and other like-minded partners, but could not disclose details.

TAIWAN'S PITCH TO EUROPE

Taiwan had already broached sanctions with European officials after Russia's invasion of Ukraine, but China's recent military exercises have seen Taiwan's position harden, six sources briefed on the Taiwan-Europe discussions told Reuters.  

    Top Taiwanese officials' calls for sanctions preparations have intensified in recent weeks. A recent Chinese white paper, which withdrew a promise not to send troops or administrators to Taiwan if Beijing takes control of the island, has prompted a redoubling of their efforts with Europe. 

Taiwan has not asked for anything specific, only for Europe to plan what actions it may take if China attacked, one source briefed on discussions said, and has asked Europe to warn China privately that it would face consequences.

EU officials have so far shied away from imposing tough sanctions on China over human rights issues, as the country plays a far bigger role for the bloc's economy than Russia, said another person familiar with the matter.

European sanctions would require all 27 member countries to agree, which is often elusive; consensus was tough even in isolating Russia after its invasion of Ukraine, in part because its gas was critical for Germany.

All of Europe, excluding the Vatican, has formal diplomatic relations with Beijing but not Taipei, though Taiwanese and European officials have had extensive, private contacts since China's military exercises began, the sources say.

Germany, the bloc's economic engine, is "wary," according to another official familiar with the discussion. "I don't think the Russia-Ukraine has fundamentally changed the way they view their relationship with China."

But there is growing concern in the German government over its economic dependence on China, with the economy minister pledging a new trade policy and "no more naivety" on Tuesday.

A spokesperson for German Chancellor Olaf Scholz declined to comment.