EU sanctions Chinese firms over Russia ties; Beijing retaliates with export controls on European defence companies

China condemned the European Union's 20th sanctions package and retaliated within 24 hours by placing seven European defence firms on an export control list, escalating a trade and geopolitical confrontation with broad implications for the technology and defence sectors. The EU adopted its 20th sanctions package against Russia on April 23 after a two-month delay caused by vetoes from Hungary and Slovakia, which dropped their objections after Russian oil flows through the Druzhba pipeline resumed. The package includes approximately 27 Chinese and Hong Kong entities among 120 new listings, the largest round of designations in two years. Sixteen entities across China, the UAE, Uzbekistan, Kazakhstan, and Belarus face asset freezes for supplying dual-use goods to Russia's military-industrial complex. Twenty-eight entities in China and Hong Kong were added to enhanced export restriction lists. China's Ministry of Commerce issued a formal condemnation on Saturday, warning that the EU would "bear all consequences." Rather than framing its response as retaliation for the Russia sanctions, Beijing cited "arms sales to or collusion with Taiwan" as the reason for restricting dual-use exports to the seven designated European defence firms in Belgium, Germany, and the Czech Republic. The EU imports 98 percent of its rare earth magnets from China, and licensing approvals for European firms have fallen below 25 percent in some sectors. Rare earth prices have spiked up to six times higher outside China than within it. European carmakers, semiconductor fabs, and defence companies have been forced to cut utilisation rates or temporarily shut production lines. The EU's ReArm Europe plan, which saw nearly $1 billion flow into European defence startups in the first half of 2025, depends on supply chains that Beijing controls. China-Russia bilateral trade stabilised at $245 billion in 2024. China exported $1.9 billion in high-priority dual-use items to Russia in the first half of 2025 alone, with full-year dual-use shipments exceeding $4 billion in both 2024 and 2025.