November 4, 2024

By Daniel Silverberg, head of Capstone’s National Security Team, and Alexander Slater, a Managing Director in Capstone’s Corporate Practice 

Both sides of the political spectrum have heralded Tuesday’s election as “the most consequential” contest ever, but there are several foreign policy developments that will likely manifest in the next year, regardless of who is President. Investors and companies should track these developments closely.  

US Threat of Sanctions for Chinese Banks  

Chinese financial institutions today serve as the lifeblood for Russia, Iran, and North Korean regimes. They process financial transactions for Russian businesses, allow China to purchase Iranian oil, and provide credit for North Korean shell companies keeping Kim Jung Un’s regime afloat. The United States, under multiple administrations, hesitated to impose sanctions directly on Chinese banks given the potential reciprocal impact on the US economy. Moreover, Chinese financial institutions have developed a wealth of under-the-radar methods to undermine sanctions enforcement. For example, China – which purchases 90 percent of Iran’s oil exports – pays Iran via barter or in Chinese currency rather than the dollar, making it nearly impossible for the US to target those activities.  

Likewise, small Chinese banks, mostly on Russia’s border in the east, are often responsible for supporting Russia’s military, and those banks have minimal exposure to the global financial system.  

Under either a Harris or Trump administration, there could be a push to go after Chinese banks directly involved in sanctionable activities.

Nonetheless, under either a Harris or Trump administration, there could be a push to go after Chinese banks directly involved in sanctionable activities. With few levers of direct influence over Iran or Russia’s activities besides military force and existing sanctions, going after Chinese banks could provide a new front of enforcement, and either candidate might be willing to incur the cost of sanctioning Chinese entities to thwart Iranian nuclear ambitions; possibly stop direct Israeli military action; and cease Chinese support for Russia’s military. President Biden signed the Iran-China Energy Sanctions Act of 2023, which, while a recitation of existing law, signals bipartisan support to pressure Chinese banks.  Moreover, China experts underestimated the extent to which China has gone ‘all in’ on helping Russia’s war effort. Given the shifting circumstances, sanctions against Chinese financial institutions, particularly smaller ones initially, could very much be on the table.  

Russia Complicates US-India Relationship 

Both Harris and Trump would likely build on bipartisan efforts to strengthen ties with India as a bulwark against China.  The India relationship will continue to receive significant attention, and we expect either candidate to ensure a senior-level, serious operator serves as ambassador. However, while either administration will push for closer ties, these efforts could be complicated by recent developments in the bilateral relationship. Over the last month, the US has stepped up sanctions on Indian companies violating bans on technology trade with Russia and unsealed a federal indictment of a now former Indian intelligence official for organizing an alleged murder-for-hire plot of a US citizen on US soil.  According to the indictment, “Vikash Yadav, a senior field officer with the government of India’s Research and Analysis Wing, along with Nikhil Gupta, planned to murder a political activist and prominent critic of the Indian government who is an American citizen in New York City.” 

Both Harris and Trump would likely build on bipartisan efforts to strengthen ties with India as a bulwark against China. 

Even if a Trump Administration were to ease off on both issues, its embrace of a more confrontational approach to global trade could make closer ties more difficult given India’s trade surplus with the US. Finally, Russia hawks in Congress will continue to regard India’s significant imports of discounted Russian crude oil with concern. Bottom line, there is likely to be a disconnect under either administration, at least initially, between the aspirational rhetoric of US-India ties and the day-to-day reality of the relationship.  

US Will Continue to Push for Ceasefire in Gaza 

 Pro-Israel supporters of Trump point to the fact that Mr. Trump allegedly told Prime Minister Netanyahu Israel should ‘do what it needs to do’ in Gaza to defeat Hamas. They contrast Trump’s position with expectations that Vice President Harris would impose limitations on Israel’s freedom of movement (e.g., see Wall St. Journal editorial).  In reality, either administration will likely pursue a ceasefire in Gaza if one is not reached by inauguration day.  Trump allegedly told Netanyahu he wants the Gaza campaign done by the time he takes office, and Harris would likely continue Biden’s effort to pressure all parties to get a deal done.  This dynamic could introduce an immediate tension point between Bibi and Trump, given that Bibi has minimum political incentive domestically to negotiate a ceasefire, and it remains unclear whether one is even viable. Moreover, Trump’s position could create the unexpected dynamic of Trump senior officials joining Biden officials before January to pressure Israel to end this war and bring hostages home.  

Amidst radically different foreign policy positions, the developments above will likely take hold regardless of who is in office.  Capstone will continue to monitor these developments for clients closely.  

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Read more from Capstone’s national security team:
What the Democratic Convention Means for Harris’ National Security Posture
US Defense and Foreign Policy in a Harris Admin
Emerging National Security Opportunities, Policy Shifts, and Chinese Consensus