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EU plans rules forcing companies to diversify away from Chinese suppliers

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The European Union is drawing up plans to force European companies to source critical components from non-Chinese suppliers as part of an effort to reduce the bloc’s dependence on China. The proposed rules would target sectors including chemicals and industrial machinery.

According to two European Union officials familiar with the matter who spoke to the Financial Times, the new rules would affect businesses in a small number of key sectors, including chemicals and industrial machinery, which have complained about a surge in cheap Chinese imports. The proposals come in response to Beijing’s export restrictions on key technologies.

The new legislation would impose caps — expected to be around 30% to 40% — on the volume that companies could purchase from a single supplier. The remaining components would have to be sourced from at least three separate suppliers, with those suppliers not all located in the same country.

EU Trade Commissioner Maroš Šefčovič wants to address the bloc’s €1 billion-a-day trade deficit and shield companies from what officials described as China’s “weaponisation of trade.” Last year, Beijing introduced export controls on rare earth magnets and other components, causing some European automotive production lines to come close to shutting down.

According to officials, Šefčovič is also planning a push involving punitive tariffs on Chinese chemicals and machinery in an effort to halt what European manufacturers describe as a dramatic surge in imports.

“We are gradually becoming dependent on exports from China in many areas,” a senior European Commission official said. “Dependencies come at a cost, and therefore we must redouble our [diversification] efforts,” the official added.

The official said China’s heavy investment in manufacturing, combined with the high levels of subsidies reported by the IMF, posed an urgent threat to the EU’s industrial base. The Chinese government, however, said the scale of its industrial policy had been exaggerated and accused the EU of pursuing protectionism “under the guise of fair competition.”

EU officials cautioned that the plans remain at an early stage, but said they would be presented at a European Commission meeting dedicated to China on May 29. If commissioners approve the initiative, a detailed proposal could later be endorsed by EU leaders at a summit at the end of June.

A second official noted that the measures would not apply solely to China, because some raw materials and chemical inputs are overwhelmingly sourced from only a handful of countries. Helium, for example, largely comes from the US and Qatar, while cobalt is primarily supplied by the Democratic Republic of Congo and Indonesia.

European Commission trade spokesperson Olof Gill confirmed that discussions would take place on May 29 but declined to comment on internal deliberations. Gill added that “such discussions do not involve the adoption of formal proposals.”

The EU will seek to use its network of free trade agreements with more than 70 countries to help manufacturers establish investment and supply chains.

Last year, the EU proposed raising steel tariffs by 50% and halving low-tariff quotas in order to protect a sector that had shrunk to its smallest size on record.

However, officials said the bloc could grant larger steel quotas to trusted partners while cutting quotas disproportionately for others, thereby maximising the impact on China.

Officials also said traditional anti-dumping and anti-subsidy instruments take too long — up to two years — because they require extensive investigations under World Trade Organization rules. Tariffs can only match the level of injury caused by imports, while Chinese companies can absorb those measures and continue selling profitably thanks to lower operating costs.

The Commission’s trade defence teams were also under pressure because of the volume of complaints. The Financial Times previously reported that complaints from the chemicals sector had reached record levels, while one industry executive said the sector was at “breaking point.”

“We simply won’t have the time or manpower to investigate all of these,” one official said. “Today, within two years, you could lose the entire sector.”

Safeguard measures are triggered by sudden surges in imports and remain in place for five years, giving industries breathing room to improve competitiveness. The first official said the steel measures had provoked a strong backlash from exporting countries.

“The political reaction they generated is proof that our partners also see that these safeguard measures work.”

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UK underwater deterrent facing scrutiny as all active Astute-class submarines remain in port

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All five of the Royal Navy’s active Astute-class nuclear-powered attack submarines are reportedly held in port for repairs or maintenance, leaving the UK with no operational vessels of this class ready for deployment.

According to a report by The Telegraph, which cited naval sources, although a sixth submarine of the same class has officially joined the fleet, it is not yet ready for deployment.

The current situation means that the UK temporarily lacks any nuclear-powered attack submarines cleared for active operations. Ryan Ramsey, a former nuclear submarine commander, described the development as a serious warning signal. “We look vulnerable,” Ramsey said. “The Russians know we can’t get our submarines to sea. When you cannot provide a deterrent at sea, you lose credibility in the eyes of the Russians.”

Lord Alan West, the former First Sea Lord and former security minister, also described the state of the submarine fleet as unacceptable and deeply concerning.

The UK Ministry of Defence stated in response to the reports that it does not normally comment on the operational status of the submarine fleet. Emphasizing that British waters remain protected at all times through a range of measures, the ministry added that strengthening underwater capability continues to be a top priority.

Astute-class nuclear submarines are tasked with protecting the UK’s Vanguard-class strategic ballistic missile submarines, which carry the country’s nuclear deterrent, as well as the aircraft carriers HMS Queen Elizabeth and HMS Prince of Wales during their deployments.

Separately, the UK’s Vice Chief of the Defence Staff, General Gwyn Jenkins, admitted in an interview with the Swedish newspaper Svenska Dagbladet in April that the Royal Navy was not sufficiently prepared for a potential war.

While noting that the navy possesses the resources to conduct combat operations and that personnel stand ready to carry out orders, Jenkins added: “But are we as ready as we should be? I think not.” He indicated that efforts to improve readiness levels remain ongoing.

Previously, The Sun newspaper reported that only two of the UK’s six Type 45 destroyers were operational. One of these active vessels, HMS Dragon, was deployed to the Mediterranean to protect British military bases in Cyprus.

The Telegraph also reported that due to a shortage of available ships, the government in London was forced to utilize a German vessel.

The state of the Royal Navy has been described in the British parliament as a “national embarrassment,” while US President Donald Trump has criticized the fleet, referring to it as a “toy navy,” according to reports by The Guardian.

Meanwhile, Russian President Vladimir Putin has repeatedly stated that Russia has no intention of fighting a war with Europe, dismissing such claims as nonsense. Putin has maintained that Western governments are escalating the situation to portray Russia as an adversary.

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Middle East energy shock threatens 1.3 million EU jobs as industrial giants warn of regulatory drag

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Morten Wierod, the Chief Executive Officer of ABB, the Swiss-Swedish multinational industrial technology giant, has warned that Europe could face mass unemployment unless it urgently deregulates its economy in the face of an energy shock triggered by war in the Middle East.

In an interview with the Financial Times, Wierod stated that European policymakers are failing to show the necessary sense of urgency regarding reforms, noting that rising gas prices are undermining the European Union’s competitiveness against the United States.

“I hope we don’t have to see a much more severe crisis that leads to mass unemployment. Such a crisis should not be a mandatory prerequisite to gain that sense of urgency,” Wierod said.

ABB, a global leader in electrotechnical and industrial automation, employs approximately 110,000 people worldwide and generates $33.2 billion in revenue. The company operates critical infrastructure businesses, including electrical distribution, building management, robotic equipment for manufacturing facilities, and data center support. Its technologies are utilized in one out of every four data centers globally.

Wierod argued that the single market and the EU as a whole must completely eliminate, rather than merely simplify, excessive regulations to stimulate economic growth. He also criticized Brussels’ plans to reduce dependence on foreign technologies, warning that this approach will lead to unforeseen consequences and rising costs.

“When you build regulation around the ‘Made in Europe’ debate, we always see that there are side effects,” Wierod stated.

Nevertheless, Wierod acknowledged that Europe possesses strong assets, including a skilled workforce, access to high-quality education, and extensive experience in crisis management. He cited the region’s success in reducing its reliance on Russian gas from 35% to less than 10% within a single year as an example of this capability.

However, Wierod pointed out that rising gas prices—driven by supply disruptions in the Middle East caused by the war between the US and Iran—have increased competitive pressures on Europe. “I am not worried that there will be no gas in Europe. There will be gas, but it will be at a higher price,” Wierod said, adding that elevated prices will persist until 2027.

Following operations by the US and Israel, Iran announced the suspension of trade through the Strait of Hormuz. The strategic waterway carries 15% to 20% of global oil, condensate, and petroleum products, as well as more than 30% of global liquefied natural gas (LNG) supplies.

Roxana Minzatu, the European Commissioner for Jobs and Social Rights, also warned earlier this week that rising energy prices could lead to the loss of up to 1.3 million jobs across the EU.

According to European Commission estimates reported by Reuters, the automotive sector is expected to suffer the largest employment decline, with a projected loss of 600,000 jobs. The construction, metallurgy, chemical, and transport sectors could lose 56,000 jobs combined. Additionally, approximately 85,000 jobs in battery manufacturing projects and 58,000 jobs in solar panel manufacturing are reportedly at risk.

European Commission data shows that in 2023, 68% of medium-sized enterprises reported a shortage of qualified personnel, and in 2024, 77% of firms identified this shortage as an obstacle to investment.

According to information obtained by Politico, the Commission plans to include a distinct, dedicated block in its recommendations for the first time, emphasizing the necessity of investing in education, vocational training, adult learning, and staff reskilling.

Data from Eurostat indicates that the EU’s manufacturing sector employs approximately 30 million people. In 2023, the sector accounted for one-quarter of the EU economy’s €9.9 trillion net turnover.

In an analysis published in March, The Wall Street Journal reported that the energy crisis stemming from the war between the US and Iran could drag the European economy into a recession. The newspaper forecast that this development would come as a “bitter surprise” for Europe, noting that most of the announced support measures require large and immediate public expenditures.

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German lawmakers block over €1 billion in defense contracts in procurement crackdown

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Two German lawmakers have blocked or forced the renegotiation of defense procurement contracts valued at more than €1 billion, exerting strict parliamentary oversight over the military’s budget spending.

According to a report by the Financial Times, Andreas Mattfeldt of the Christian Democratic Union (CDU) and Andreas Schwarz of the Social Democratic Party (SPD) serve on the Budget Committee of the Bundestag, Germany’s federal parliament.

The committee holds the authority to approve all military procurement projects valued at over €25 million.

In January, the two lawmakers vetoed a €600 million contract intended for Munich-based electronics group Rohde & Schwarz to supply a mobile intelligence system. The parliamentarians objected to the contract being awarded directly without a competitive bidding process.

One month later, they blocked a €462 million direct agreement with defense contractors Rheinmetall and MBDA. The contract was aimed at developing a laser system designed to protect naval vessels from drone attacks.

In February, the lawmakers also successfully lowered the maximum cost of three contracts intended for the procurement of kamikaze drones. Later in April, they halted the planned purchase of 900 diesel fuel tanker containers for the German armed forces, the Bundeswehr. The representatives intervened after discovering that the price of the tankers had doubled compared to a similar purchase made five years prior.

“We have brought about a paradigm shift because we are responsible for the immense amount of money entrusted to us by taxpayers,” Mattfeldt said in an interview with the Financial Times. “I want to be able to say that we have contributed to the Bundeswehr getting the best equipment at the best price.”

Schwarz, who, like his colleague, previously served as a municipal mayor, added: “We do not get involved in ideologies; we use our common sense.” While colleagues and aides jokingly refer to the pair as “the two Andys,” the two lawmakers have nicknamed themselves “the A-Team.”

Budget committee powers stem from past cost overruns

The extraordinary powers of the budget committee over defense procurement date back to 1981. At the time, parliament reacted to severe cost overruns in the Tornado fighter jet program by decreeing that all military projects exceeding 50 million deutsche marks must receive legislative approval.

Today, that threshold stands at €25 million, a limit that one official described as “completely outdated.”

A spokesperson for the German Ministry of Defense said: “Parliamentary control over major acquisitions is an important oversight tool in our democracy.”

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