The think tank ringing the alarm

A new report from the Foundation for Defense of Democracies, or FDD, warns that China may be preparing for a conflict it hopes never to fight. Instead of launching missiles at Taiwan, Beijing could try to force the island into surrender by cutting off its fuel and electricity.

The study, produced by FDD in partnership with Taiwan’s Centre for Innovative Democracy and Sustainability at National Chengchi University, is based on a detailed tabletop exercise called “Energy Siege.” Teams representing China, Taiwan, the United States, Japan, and other partners spent three scenarios wargaming how the Chinese Communist Party could slowly strangle Taiwan’s energy imports and how the world might respond.

Their conclusion is stark. China could paralyze Taiwan’s power grid in a matter of weeks and turn that crisis into a global economic shock. Because Taiwan produces around 60 percent of the world’s semiconductors and 90 percent of the most advanced chips, a prolonged power shortage on the island would quickly ripple into U.S. factories, defense programs, and financial markets.

Why Beijing might choose an energy siege over war

For Beijing, subjugating Taiwan is seen as a core test of Communist Party legitimacy and a key part of leader Xi Jinping’s personal legacy. Yet an outright invasion risks a direct clash with the United States and other nuclear-armed powers. The report argues that China is more likely to rely on coercion instead of combat.

Rather than tanks and bombs, Beijing would lean on economic, legal, and cyber tools that are powerful but deniable. The goal is to convince Taiwan that resistance is pointless, not to destroy it in a dramatic battle. FDD calls this a “gray-zone siege” – pressure applied just below the threshold of open war.

As one of the report’s authors, Craig Singleton, puts it, China is pursuing a strategy of slow-motion strangulation. Its aim is exhaustion, not escalation. Beijing believes that pressure plus patience will eventually produce political collapse in Taiwan. What truly unnerves Chinese leaders is not Taiwan’s ability to fight but its ability to withstand coercion.

Taiwan’s dangerous energy dependence

This strategy is possible because Taiwan is one of the most energy-insecure economies in the world. The island imports roughly 98 percent of its energy. Almost half of its electricity comes from liquefied natural gas, and another 30 percent comes from coal.

Taiwan can only store a few weeks of LNG and a few months of coal at normal burn rates. Its three main LNG terminals and the Taichung coal offloading port are clustered along the west coast, and incoming ships must pass through the narrow Taiwan Strait, well within range of Chinese missiles and naval forces.

A successful Chinese squeeze on LNG shipments could cut Taiwan’s power generation by about half. That would force Taipei into a grim choice. It could keep the lights on for hospitals, schools, and homes, or it could keep semiconductor giants like TSMC and UMC running. Either way, someone would lose, and the rest of the world would feel it.

How an energy siege could unfold

FDD’s “Energy Siege” exercise lays out a clear playbook for how Beijing might carry out this strategy. The opening moves would not look like war. They would look like administration.

China could begin with:

• – “Routine” coast guard inspections of ships headed toward Taiwan
  • – New customs rules that slow or redirect cargoes
• – Pressure on foreign suppliers like Qatar to quietly delay LNG shipments
• – Cyber intrusions into Taiwan’s energy sector
• – Coordinated disinformation campaigns

In the first scenario, called Perimeter Lock, Chinese coast guard ships and militia boats normalize a constant presence around Taiwan while Beijing insists it is simply enforcing maritime rules. At the same time, China leans on Qatar to adjust LNG delivery schedules and launches a wave of cyberattacks against Taiwan’s grid, LNG terminals, and industrial control systems.

Disinformation accompanies every move. Beijing spreads rumors about coming blackouts, military fuel hoarding, and grocery chains preparing for shortages. It pushes stories that question President Lai Ching-te’s competence and imply that the United States, Japan, and Australia will hesitate to help. The report bluntly states that disinformation is not a sideshow for China. It is a primary weapon.

As the siege deepens in the second scenario, Resolute Surge, cyber operations expand to hit ATMs, hospitals, schools, and transportation systems. Point-of-sale systems in grocery stores are disrupted to generate despair and anger among ordinary citizens. At the same time, Beijing warns global shipping firms and insurers that supporting U.S. or allied escort operations could get them blacklisted from Chinese ports or slow-walked through regulations.

In the third scenario, The Precipice, the United States and G7 nations rule out naval escorts and limit themselves to statements and regulatory pressure. With no direct military pushback, China ramps up harassment by its maritime militia, uses ransomware and criminal proxies to interfere with Taiwan’s energy logistics, and quietly threatens foreign governments and companies with economic costs if they side too strongly with Taipei.

Throughout these stages, the goal is the same. China wants to keep pressure just low enough to avoid a clear trigger for war, while steadily narrowing Taiwan’s options and eroding its public confidence.

From island blackout to American supply chain crisis

If this energy siege works, the consequences would reach far beyond Taiwan. The island is the beating heart of the global chip industry. It produces about 60 percent of all semiconductors and more than 90 percent of the most advanced chips used in cutting-edge electronics and many defense systems.

An energy shock that forces Taiwan to shut down or sharply reduce industrial output would quickly hit U.S. supply chains. The report warns that slowly shuttering industrial capacity in Taiwan would turn a local crisis into a global disaster when most mature and nearly all advanced chips stop circulating.

For the United States, that would mean:

• – Immediate disruption in electronics manufacturing
• – Strains on defense production tied to advanced chips
• – Volatility in financial markets as companies scramble for alternatives
• – Pressure on policymakers to respond even if there has been no open attack

Beijing would not stop at targeting Taiwan’s morale. It would also target American public opinion. The report cautions that Chinese information operations would try to “seed questions across U.S. online ecosystems,” wearing down support for naval convoys or other protective measures. In other words, China would work hard to convince American voters that defending Taiwan’s fuel shipments is not worth the risk.

How the United States might respond

The scenarios in the FDD exercise show several different paths the United States might take. Some are more forceful than others.

In the early stages, U.S. players tended to favor economic and diplomatic tools over military moves. Washington looked for ways to turn the crisis into a trade opportunity, offering to backfill LNG supplies in exchange for long-term Taiwanese investments in U.S. strategic sectors. American planners discussed direct links between Taipei and U.S. LNG exporters and expanding semiconductor manufacturing facilities in the United States, including TSMC’s project in Arizona.

When the game assumed a more serious escalation, the U.S. team shifted to a limited military role. Washington established a Joint Maritime Energy Corridor, anchored by U.S. naval assets, to escort LNG tankers to Taiwan. The plan included reflagging commercial vessels, arranging insurance support, and working with Japan and Australia on logistics.

At the same time, the United States explored financial and regulatory pressure. Officials considered:

• – Freezing Chinese commercial assets in the United States if Beijing escalated
• – Tightening export controls on advanced chips and chipmaking equipment
• – Reviewing Chinese firms’ compliance with audit rules, raising the threat of delisting
• – Restricting engines and other key parts for Chinese commercial airliners
• – Moving ahead with bans or restrictions on Chinese-owned platforms like TikTok and other apps

In the scenario where the United States refused to run naval escorts, Washington leaned heavily on these non-military tools. It issued joint statements, tightened export controls, reviewed visas, and mapped elite CCP assets for potential seizure. But it left Taiwan to handle energy deliveries largely on its own.

The exercise exposes a central dilemma. Without a credible plan to keep fuel flowing to Taiwan during a crisis, even the strongest sanctions and speeches may not prevent an energy siege from succeeding.

What the United States can do now to reduce the risk

The report does not argue that a crisis is inevitable. It argues that preparations now can make an energy siege much less attractive to Beijing and much less damaging if it happens.

For the United States, key steps include:

• – Expanding LNG export capacity, including projects in Alaska, so that America can serve as a reliable supplier to Taiwan in an emergency
• – Increasing direct LNG exports to Taiwan and supporting its purchase of long-term contracts
• – Preparing conditional sanctions packages aimed at discouraging China from pressuring third-country suppliers like Qatar
• – Quietly signaling to Doha and other exporters that bending to Chinese pressure on Taiwan’s shipments would carry costs for their broader relationship with the West
• – Planning and rehearsing convoy and escort operations involving U.S. and allied navies, including options to reflag vessels bound for Taiwan
• – Coordinating regional maritime corridors with Japan and the Philippines so that commercial shipping knows where military protection would be available
• – Establishing a naval and maritime security coordination structure that can quickly activate in a crisis, bringing together military officers, coast guards, shipping companies, and even private maritime security firms
• – Creating a trusted shipping information center to provide real-time routing and threat data to commercial vessels in the region

The report also suggests that Washington should publicly state that it is preparing contingency operations to counter an energy-focused shadow quarantine. Such signaling would reassure Taiwan, inform shipping and insurance industries, and make Beijing think twice about escalation.

How Taiwan and its partners can build resilience

The study places at least as much emphasis on Taiwan’s own vulnerability and resilience as on U.S. choices. FDD’s exercise shows that Taiwan and its partners can take practical steps now that raise the costs of any siege and make success much less likely.

On energy, the report recommends that Taiwan:

• – Diversify its LNG supply chains, including purchasing its own LNG carriers and buying more LNG from the United States
• – Expand LNG storage facilities, including floating regasification barges, and increase open-yard coal storage
• – Work with Japan, Australia, and South Korea to develop a regional strategic LNG reserve
• – Reconsider nuclear power, potentially restarting existing plants and investing in small modular reactors, while addressing safety, waste, and public consensus
• – Harden the grid by improving efficiency and voltage regulation and using microgrids, rooftop solar, and pre-staged diesel generators to – – keep critical facilities powered even under low supply

On cyber, Taiwan is urged to:

• – Improve public-private cooperation to protect critical infrastructure, especially the energy sector
• – Build sector-wide recovery and response plans that feed into a national resilience strategy
• – Consider developing an indigenous offensive cyber capability to impose costs on Beijing and deter repeated intrusions
• – Work closely with Five Eyes partners and other allies on joint training, incident response, and lessons learned

On the maritime front, Taiwan and its partners should:

• – Prepare for convoy and escort operations by exercising together and developing shared rules and communication channels
• – Push for Taiwan’s participation in the International Maritime Organization so it has a voice in global shipping rules
• – Establish regional maritime corridors that can be activated during crises
• – Support the creation of a shipping information center that can provide trusted data to commercial captains during periods of heightened tension
• – Encourage European partners to review holdings and influence by Chinese state-owned shipping giant COSCO in key ports, which could become leverage in a crisis

The report also stresses societal resilience. Taiwan is already taking steps, such as distributing millions of civil defense manuals that explain how civilians should respond in emergencies and warn that any claim of “Taiwan has surrendered” should be treated as false. The authors argue that clear crisis messaging on energy security, independent audits of resilience measures, and widespread adoption of home solar, batteries, and emergency kits can harden public morale against disinformation and panic.

A contest Taiwan and the United States cannot afford to lose

The FDD exercise ends with a warning. A cyber-enabled economic warfare campaign focused on Taiwan’s energy sector poses serious risks to the island, while imposing relatively low costs on Beijing, especially if allies hesitate to act. Without firm preparations and clear coordination among Taiwan, the United States, Japan, Australia, and European partners, an energy siege could push Taipei toward painful choices that threaten both its sovereignty and global economic stability.

The first shot in the next Taiwan crisis may never be fired. Instead, the battle may begin with paperwork, port inspections, cyber intrusions, and online rumors. Whether that campaign succeeds will depend on decisions made long before any tank moves or missile launches. The report’s message is clear. If Taiwan and its partners act now to build energy, cyber, maritime, and societal resilience, they can deny Beijing a quiet path to victory and protect U.S. supply chains from a shock they are not yet ready to absorb