The New Great-Power Squeeze: Between Sanctions & Supply Chains

Thinking about the implications of Washington & Beijing's systems of coercion for India.

When Donald Trump flew out of Beijing after meeting Xi Jinping, the commentary mills in New Delhi went into overdrive. Were we witnessing a new detente? A nascent G2? Or merely a tactical pause in an otherwise structural rivalry? A second strand of discussion centred on scorekeeping. Did Xi achieve his objective of blunting American coercion, with Trump’s very presence in Beijing amounting to an acceptance of China as an equal? Or did Washington come away better off, extracting purchase commitments and perhaps a measure of concurrence on Iran? These are engaging debates, and they are not unimportant. But they obscure the far more serious policy challenge that India confronts in this new era of great power competition.

The era we are entering is neither a G2 condominium nor a new Cold War of rival blocs. Rather, it is an era in which each side holds leverage over different parts of the global system, and mutual vulnerability persists even amid deepening rivalry. This rivalry is being expressed through economic warfare being conducted in parallel but non-identical domains. The United States dominates the financial arteries of the global economy, including the dollar, payments infrastructure, and capital markets. It also continues to command control over the high-end technology value chain. China, on the other hand, dominates key resources and industrial capabilities.

Consider the coercive architecture that each side has built. American financial power rests on the dollar’s reserve status, influence over SWIFT, and the extraterritorial reach of its law. Layered atop this are increasingly sophisticated tools. These include primary sanctions administered by OFAC, secondary sanctions that penalise third-country firms with no American nexus, sectoral sanctions, and the Specially Designated Nationals list. In extreme instances, Washington can even carry out dramatic sovereign asset freezes, the kind that were imposed upon Russia and Iran. The US export control system is equally elaborate. The Entity List carries a presumption of denial, the Foreign Direct Product Rule asserts jurisdiction over anything made anywhere with American technology, and Washington can also enact coordinated controls with allies and partners, regardless of their willingness to participate.

Beijing, meanwhile, has been constructing a mirror image in its own domain of strength. From 2023 onwards, its export-control regime began covering gallium, germanium, graphite and antimony, while successive measures through 2025 expanded mandatory licensing requirements to a growing range of rare-earth materials and products. China’s technology export-control catalogue has since expanded to, restricting the export of rare-earth separation, smelting and processing know-how. New measures in October 2025 also sought to extend Chinese licensing authority to certain foreign-made products incorporating Chinese-origin rare earths or rare-earth technologies. Beijing also has an Unreliable Entity List, which has primarily targeted US defense technology and defense aerospace firms, and it has established a new Malicious Entity List, which targets foreign entities and individuals that implement or assist in implementing a foreign state’s “unlawful extraterritorial jurisdiction measures”. In addition, it has put in place new outbound investment rules, which constrain the offshore transfer of industrial supply chains, talent and expertise. Together, these measures point to the emergence of a comprehensive Chinese economic security architecture akin to America’s; it’s just that it is operating in a different domain.

Of course, there are significant differences—operational, procedural, in terms of sophistication and maturity and values-based—between the two architectures. These are indeed worth contemplating. The key issue, however, is that both are increasingly weaponising this dominance for political and strategic ends.

So, what does this mean for India or the broader developing world? To understand that, let’s play a game.

Riddle me this: When Beijing announced its restrictions on rare earth elements in April 2025, in response to Trump’s Liberation Day tariffs, how long did Indian automakers wait for import licences? The first permits were reportedly issued to some suppliers in May. Big American automakers began getting clearances in early June. By mid- to late June, suppliers to European companies were receiving approvals too. Beijing even agreed to a “green channel” for the Europeans. But it took a full seven months, i.e., sometime in late October, for Indian players to begin getting access. The reasons for this differentiated treatment ranged from the nature of political ties and diplomatic pressure to the supply chain centrality of the companies in question and Beijing’s concerns around third-party exports and end-user scrutiny. The licensing regime, in other words, functioned as a calibrated instrument of statecraft.

Now look at the other side. Despite the strength of India-US strategic cooperation, New Delhi has increasingly found itself entangled in American coercion, whether over Iranian oil purchases, the relationship with Russia or simply trade frictions. The specific cases are instructive. On October 30, 2024, OFAC sanctioned 19 Indian private-sector entities and two Indian nationals for allegedly participating in procurement networks supplying Russia’s military-industrial base with dual-use goods. In July 2025, the Trump administration sanctioned 6 Indian companies over purchases of Iranian-origin petrochemical products. On October 9, 2025, OFAC designated more than 50 individuals, entities and vessels facilitating Iranian oil and LPG exports, among them were 8 Indian nationals and 9 India-linked companies, all placed on the SDN list. And on October 22, 2025, OFAC designated Rosneft, Lukoil and their subsidiaries, triggering compliance obligations worldwide. Major Indian refiners began curtailing direct purchases with the sanctioned firms while scrambling for alternatives.

This is the world India, and other developing countries, must now navigate, one in which the two largest economies wield institutionalised coercive economic systems simultaneously, but in different domains. And precisely because the domains are different, there is no clean escape. You cannot cut yourself off from one and simply lean towards the other. The dollar and technology controls system and the minerals and manufacturing controls system are not substitutes. India will have to pursue gradual de-risking from both, with the aim to limit coercibility, while also continuing to engage with both in order to secure its prosperity. It is a tough circle to square.