EU unveils plans to avoid economic risks when dealing with Russia, China

The European Union unveiled a proposal on Tuesday to protect the bloc’s economies from risks posed by unreliable suppliers in countries that do not share its values, such as China, after the war in Ukraine exposed Europe’s dependency on Russia for oil and gas.

Containers from China are piled up in the harbor in Hamburg, Germany, Wednesday, Oct. 26, 2022. AP - Michael Probst

The European Commission, the EU’s executive arm, is trying to develop measures to protect trade and investments, particularly in the tech and communication sectors, that rivals might want to exploit for security or military purposes.

Announcing the proposal, which must be endorsed by bloc members, EU commission President Ursula von der Leyen said: “The world has become more contested and geopolitical, and there is a limited set of key technologies that can be used in a different and aggressive way.

“Given the changing nature of the risks, we now need a strategic vision for how we are going to handle these risks.”

Von der Leyen added that the EU needed to be “more assertive” in using its existing tools to tackle the problem and develop new ones.

🔴LIVE | Read-out of the College meeting/press conference by Executive Vice-Presidents @vestager and @VDombrovskis and HR/VP @JosepBorrellF on the European Economic Security Strategy https://t.co/BhYVvx8o0i

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'Country agnostic'

The plans are being promoted as “country agnostic” because no target nations are mentioned by name, but they dovetail with the commission's new drive to “de-risk” its relations with China without completely “decoupling”, given it relies on the Asian giant to tackle global challenges such as climate change.

Von der Leyen said the capital, expertise and research of European companies must not be “abused by countries of concern for military applications”. She raised, in particular, concerns about the security of 5G and 6G telecoms networks.

The commission considers Chinese firms Huawei and ZTE to be high-risk suppliers. In recent days it endorsed moves by some of the 27 EU member countries to exclude the two companies from their 5G networks.

In the 2019 EU-China Strategic Outlook, Brussels for the first time called Beijing a "systemic rival." Since then, things have gone downhill with both sides hitting each other with sanctions following increasing European criticism over China's human rights situation, resulting in the EU cancelling a major investment deal in early 2021. 

• China and the EU in tense stand-off on human rights and sanctions
• European Parliament votes to freeze EU-China investment deal

The aim of the new plan is to make European economies and supply chains more resilient to threats and to resist energy or inflation hikes produced by the war while keeping trade flowing.

Under the scheme, the EU would work with countries that share its economic security concerns.

“We cannot treat a supply dependency on a systemic rival the same as we would treat that dependency on an ally,” commission executive vice-president Margrethe Vestager said.

Other risks to be countered include those posed to cyber-security or to critical infrastructure such as pipelines, undersea cables, power generators and transport networks. The threats posed by countries using trade or investment to change EU policies would also be addressed.

The challenge will be to unite EU member states – each of which have their own national policies toward countries like China and Russia – around the plans.

EU leaders are expected to discuss the scheme at their June 29-30 summit in Brussels.

(with wires)