Hot Air Balloons vs Real Economic Warfare

Are we in a geoeconomic game of chicken now? Russia and China bring Belarusian pocket knives (ekhm, hot air balloons) against a coordinated set of United States and European Union sanctions.

As Moscow and Beijing reel from the measures, which are cutting Russian oil revenues and prompting threats of rare-earth retaliation, the West holds the upper hand through unity. Yet geoeconomics alone cannot secure victory. Ukraine says it can fight for another three years, but Donald Tusk told The Sunday Times that Russia is willing to carry this much further.

Who is afraid of economic warfare?

GLOBAL/REGIONAL

• Moscow has condemned the latest United States (US) measures targeting Lukoil and Rosneft as ‘economic warfare,’ with Kremlin spokesman Dmitry Peskov warning that retaliatory steps are under urgent review to safeguard energy exports. The Kremlin also announced a successful test of its nuclear capabilities, widely recognised as a reaction to geoeconomic pressures.
• China’s state oil majors suspend Russian oil buys due to sanctions. Sinopec and CNPC have quietly halted new spot purchases of Russian ESPO and Urals grades, citing secondary sanction risks.
• The freeze threatens to slash Russia’s oil revenue by an estimated 1.8 billion US dollars per month, while Hungary scrambles to secure exemptions amid fears of domestic fuel shortages. Energy analysts predict a broader rerouting of Russian barrels to India and shadow fleets, though insurance bottlenecks could cap volumes.
• Beijing also retaliates as Xi Jinping expects to meet Donald Trump on Thursday in South Korea. China’s Commerce Ministry accused Washington of ‘weaponising trade’ and threatened counter-measures, including restrictions on rare earth exports critical to US defence and renewable sectors.
• The Office of the US Trade Representative (USTR) has formally initiated an investigation into China’s compliance with the 2020 Phase One agreement, citing persistent shortfalls in agricultural purchases and intellectual property enforcement. Section 301 gives the US the authority to investigate and respond to unjustifiable or unreasonable foreign trade practices. Trump, speaking at a Wisconsin farm rally, vowed to impose fresh tariffs if Beijing fails to meet its 200 billion US dollars goods purchase commitment by year-end, warning that “the deal is dead” without immediate action.
• The Council of the European Union (EU) has adopted its negotiating mandate on a regulation to ban all Russian energy imports from 1 January 2028, part of a broader REPowerEU strategy. It aims to eliminate the bloc’s remaining 15 per cent dependency on Russian pipeline gas and LNG, with transitional safeguards for Hungary and Slovakia until alternative routes are secured.
• Budapest is lobbying for an exemption beyond 2028, citing its reliance on the Druzhba pipeline.
• Belgian Prime Minister Bart De Wever has torpedoed the EU’s proposed €140 billion reparations loan to Ukraine, insisting on full risk-sharing among member states before unleashing frozen Russian assets held in Brussels.
• The European Commission is scheduled to adopt its 2025 Enlargement Package on Wednesday, which will include annual progress reports for all EU candidate and potential candidate countries.
• European Council President António Costa met Chinese Premier Li Qiang in Kuala Lumpur, stressing the EU’s aim for constructive and stable ties while flagging concerns over China’s expanded export curbs on critical minerals and urging support for ending Russia’s war in Ukraine.

UKRAINE