Beijing issues a warning to the EU following the inclusion of 27 Chinese companies in the 20th sanctions package against Russia and responds by taking action against European defense firms.

      **Summary**: China criticized the EU's 20th sanctions package, which included around 27 entities from China and Hong Kong for providing dual-use goods to Russia’s military sector. In response, China quickly added seven EU defense companies to its export control list, framing the action as related to Taiwan instead of acknowledging the connection to Russia. The EU faces a dilemma: while its sanctions demand limiting Chinese technology exports to Russia, its defense capabilities rely on critical minerals and rare earth magnets from China, which could be restricted in retaliation.

      On Saturday, China's Ministry of Commerce formally condemned the EU’s inclusion of about 27 entities in its largest sanctions package against Russia in two years. China stated this action contradicts the agreement reached between Chinese and EU leaders and undermines bilateral trust and stability, warning of necessary measures to protect Chinese businesses, placing the onus of consequences on the EU. Within a day of the sanctions being implemented on April 23, China added seven EU entities to its export control list, banning all dual-use exports to them. The targeted defense firms were from Belgium, Germany, and the Czech Republic, but China portrayed the action not as retaliation for the Russia sanctions but as a consequence for “arms sales to or collusion with Taiwan,” thus allowing it to escalate tensions without directly addressing the main issue.

      **Details of the Sanctions Package**: The EU adopted the 20th sanctions package on April 23 after delays due to vetoes from Hungary and Slovakia, who tied their agreement to the resumption of Russian oil through the Druzhba pipeline. Once the oil resumed, those countries withdrew their objections. This package introduced 120 new sanctions, including targeting 56 entities linked to Russia's military and energy sectors, imposing bans on transactions with 20 Russian banks and four third-country financial institutions believed to be involved in evasion, and designating 46 more vessels as part of a shadow fleet. New restrictions were also placed on cryptocurrency platforms. Notably, the Kyrgyz Republic is the first entire jurisdiction labeled as a "systematic and persistent circumvention risk." Additionally, the EU launched a €90 billion loan package for Ukraine, and Kaja Kallas, the EU high representative for foreign affairs, indicated that preparations for the 21st sanctions package had already commenced.

      The entities sanctioned fell into two categories. Sixteen entities from third countries, including China, the UAE, Uzbekistan, Kazakhstan, and Belarus, were frozen for supplying dual-use goods or weapons to Russia. Of the 60 entities added under enhanced export controls, 28 are in China and Hong Kong, facing heightened restrictions on dual-use technology exports. Notably, the China Space Sanjiang Group was sanctioned under Belarus sanctions for its role in producing military chassis. The trend in sanctions packages is concerning; previous rounds have progressively targeted more Chinese entities.

      **Trade Dynamics**: China-Russia trade reached $245 billion in 2024, more than double that of 2020, but fell by 6.9% in 2025 due to complications from financial sanctions affecting payment systems and increased caution among Chinese banks. However, not all goods suffered a decline, as China exported $1.9 billion in essential dual-use items to Russia in just the first half of 2025. Full-year dual-use shipments surpassed $4 billion in both 2024 and 2025. There was a dramatic rise in manganese ore exports to Russia, and turbojet engine exports to Russia saw an increase of 37% in comparison to earlier years. Prices for Chinese export-controlled items sent to Russia surged significantly compared to those sent to other markets, suggesting the scarcity is driving higher costs.

      The United States has been sanctioning Chinese firms for assisting Russia since 2024, acting more swiftly and aggressively than the EU. In October 2024, the U.S. Treasury sanctioned Chinese drone companies manufacturing drones for Russia. By 2025, over 20 Chinese firms were sanctioned for supplying critical inputs to Russia's defense industry. The dynamic is shifting, with the EU's 20th package drawing its policy stance closer to that of the U.S. The U.S. has seen these sanctions as a mechanism not only against Russian support but also as a way to curb Chinese technological development, which Beijing perceives as a concerted effort to contain it.

      **China's Retaliation**: China's immediate response included placing seven EU defense firms on its export control list, prohibiting them from receiving any dual-use exports from China. This was strategically framed as a Taiwan issue, which allows Beijing to impose costs on European industry without reaffirming any support to Russia's military.

      **Underlying Contradictions**: The EU is in a precarious situation. Its sanctions policy against Russia necessitates restricting Chinese entities that provide dual-use technology to the Russian military-industrial complex. Simultaneously, its defense strategy relies heavily on rare earth minerals and components predominantly sourced from China. The EU's substantial trade relationship with China, amounting