Russia-Related Self-Harm

Since the 2014 Western-driven fascist coup in Ukraine, the European oligarchy and its courtiers have striven mightily to subjugate Russia so that it could become a new spatial fix for the profitability issues of their private sector. After Russia had remained unbowed, and the Ukrainian army lost badly at Ilovaisk (2014) and Debaltseve (2015), the Europeans had twice negotiated agreements (Minsk 1 and Minsk 2) in bad faith to gain an end to the hostilities to save the Ukrainians from further defeat. Between 2015 and 2022, the West worked on building the Ukrainian military into a much stronger force and massed it on the border of the Donbas as shelling of the Donbas area was intensified. Seeing the high probability of an invasion designed to cut off the Donbas from Russia, a relatively small contingent of the Russian army (about 70,000) invaded and with the help of the Donbas militias gained a sweeping victory.

European leaders in group photo with U.S. President Donald Trump and Ukraine’s President Volodymyr Zelensky during their Aug. 18, 2025, visit to Washington. (Simon Dawson / No 10 Downing Street/Flickr/CC BY-NC-ND 4.0)

The European response was the sweeping sanctions, and together with the US the theft of Russia’s foreign exchange reserves and its cutting off from the US$ and Euro payments systems. In addition, a widespread anti-Russian propaganda and cultural war greater than that seen in the Cold War. At the same time, negotiations in bad faith were held in Istanbul to give the Ukrainians time to recover and to engineer the retreat of the Russian forces near Kiev. Although the Russians remained resilient, the small size of the Russian force inn Ukraine was unable to progress much further. By the Fall, a Ukrainian army rebuilt by the West and benefiting from vast Western intelligence assets was able to push back the Russians in the Kherson and Kharkov oblasts.

As the Ukrainian army suffered horrendous losses in its ill-fated 2023 campaign, and later in its ill-thought out 2024 Kursk campaign, the equipment and munition reserves of Europe were used up to replace the Ukrainian losses. The Russians mobilized to vastly increase their presence in Ukraine and pushed the Ukrainians back while causing vast Ukrainian casualties that have withered the pool of available fighting age men. Europe kept up with its sanction packages, desperately trying to crush a Russian economy that continued to grow, with the latest EU sanctions package being its fifteenth. All the while, Russia looks stronger than ever in Ukraine and the Ukrainian army weaker than ever.

Europe has cut itself off from cheap Russian pipeline gas, exchanging that for expensive US and other Liquefied Natural Gas (LNG) just as its own reserves of gas are dwindling. In 2015, the EU had produced 84.28 bcm of natural gas per year, in 2020 47.86 bcm and in 2025 33.4 bcm. Between 2020 and 2025, UK production fell from 39 bcm per year to 31.5 bcm. The result has been much higher electricity costs, exacerbated by the nature of the European pricing schemes that sets the average price to be the marginal clearing price (i.e. expensive LNG). In addition, Western firms have been cut off from the Russian market and replaced with Russian, Chinese and other suppliers. The sustainable mix of cheap Russian energy and the second industrial revolution energy intensive industries of Europe has been destroyed.

After twelve years of utter failure of the attempt to subjugate Russia what has been the response? To double down even more with plans to vastly increase European defence spending at the cost of social and infrastructure spending, after already more than a decade of destructive austerity, and to start pirating Russian vessels on the open seas in a desperate attempt to reduce Russia’s oil revenues that were greatly bolstered by the US war of aggression on Iran. Europe still imports some Russian pipeline oil and gas via pipelines through Ukraine and Turkey, fertilizers, nickel and rare earths. The EU plans to ban all Russian LNG by January 2027, and all pipeline gas by October 1st 2027, and all oil (including third party refined products using Russian oil) in late 2027. The open piracy may cause Russia to bring those dates forward, as well as cutting off all of the other exports to Europe. Poland is heavily dependent upon Russian and Belarusian fertilizers, with many other European countries alo importing them.

US-Related Self Harm

• All tariffs on US industrial goods exports to the EU to be removed

• Preferential treatment for US agricultural goods exports to the EU

• The US imposes the Most Favoured Nation rate or 15% tariffs on the import of EU goods, whichever is higher. With limited exemptions for aircraft parts, generic pharmaceuticals and cork etc.

• EU steel and aluminum exports to the US have a 50% tariff rate

• The EU agrees to accept the US (lower) levels of regulatory standards and certificates, not to tax internet services (where the US dominates) and to address US concerns about EU sustainability legislation

The UK negotiated a slightly better surrender to the US, with a 10% general tariff, 25% on steel and aluminum and a 100,000 quota for 100,000 vehicles at a10% tariff (above that is 25%).

The biggest losers from this are the EU automotive, branded pharmaceutical, agribusiness and steel and aluminum sectors. The services sector, where the US runs a very significant surplus with the EU, was excluded. From 2023 to 2025, the US services surplus with the EU grew from EU 109 billion to EU 178 billion, reducing the overall current account position to one of an only EU 20 billion surplus. With the trend in the services balance, and the goods balance being impacted by the trade surrender terms, the EU may very soon be running an increasing current account deficit with the US.

At the same time European semiconductor equipment makers (e.g. ASML), and automotive and industrial chip manufacturers (e.g. Nexperia), have been impacted by the US technology export restrictions upon China. The proposed US MATCH Act will extend those restrictions to older ASML technology, with China still accounting for one third of all ASML sales. These high technology goods are the ones that China is specifically interested in importing. In response to the US sanctions, China has gone all out on developing a fully domestic chip supply chain which will not only remove European sales but also create direct competitors in other markets.

China-Related Self Harm

Having cut itself off from one great power (Russia) and now increasingly abused by its great power boss (the US), Europe has only one other great power (China) available to work with in a positive fashion. A great power that can provide the energy technologies (solar, wind, nuclear, batteries, electrified transport etc.) at highly competitive prices, that will enable Europe to escape its external energy dependence and help it regain a competitively priced energy supply. But instead, it is increasingly biting the hand that has been offered in good faith.

The UK already made the colossal error of rejecting much cheaper and proven Chinese nuclear and train network proposals, ending up with the highly expensive and ever-delayed EDF nuclear plants and the disaster which is its train network policy. The EU also placed tariffs upon Chinese battery electric vehicles (BEVs) and is now looking to place tariffs upon Chinese plug in hybrids (PHEVs) as the Chines share of the European car market approaches 10%.

The EU is currently working on legislation packages that to all intents and purposes assume that China competitiveness in a given sector can be taken as proof of Chinese overcapacity and therefore be open to EU import restrictions! Another possibility being worked upon is for the EU to be able to force EU companies to diversify their suppliers away from those that are Chinese. Let’s remember that Europe is predominantly the site of second industrial revolution industries with only a small number of leading high technology companies. It is in no position to bully other countries in this way, most especially a China that has a vast domestic market and has rapidly lunged up the technology curve to have a significant competitive position in many of the leading technology sectors; while dominating the “green” industries.

At the same time as the EU is looking to block Chinese imports, which in many cases are simply better than EU produced products (e.g. cars), it is also making Chinese investments in the EU much more difficult. It has already passed legislation to limit Chinese investment in the semiconductor and “critical infrastructure” areas, and has encouraged member states to review all investment in China in “critical technology” sectors. New legislation threatens to place restrictions on Chinese investments related to batteries, electric vehicles, and solar pv; including joint venture investments with requirements for technology transfer and local content rules. Other proposed legislation threatens to exclude “high risk vendors” in 18 critical sectors from investing in the EU; for example, Huawei.

The Chinese have pointed out that Europe does not have a dominant position in leading industries to back up what amounts to an attempted escalation and bullying approach. The utter contradiction between the EU’s statements about wanting more Chinese investment, and more industrial coordination with China, and to learn from Chinese companies, and these legislative actions is also pointed out. As is the ridiculousness of judging any Chinese competitiveness to be due to “overcapacity” when in Schumpeterian terms it is the uncompetitive EU production that represents the overcapacity that needs to be either renewed or destroyed; the EU will be locking itself into a backward industrial structure. The Chinese are becoming exasperated with the European, as noted in this article:

First, there are the negotiations between the EU and Chinese automakers on price undertakings in the anti-subsidy case for electric vehicles , an issue that the two sides had basically reached an agreement on at the technical level last year. Second , there are the specific obstacles China is encountering in importing from the EU . Previously, China had expressed to the EU its willingness to actively expand imports from the EU, but the crux of the problem is that the EU needs to relax export controls on high-tech products and not politicize or weaponize trade issues.

However, the EU did nothing on these issues. At the negotiating table, they did only one thing: repeatedly demand that China respond to their concerns regarding rare earths and other issues.

The Chinese have been very open to working with Europe, and let’s remember how open China was to European investment in China; even allowing such companies as VW to dominate its automobile sector. Now it is Europe that needs help from China, and instead it bites the hand of cooperation that is offered. Europe has very severe industrial problems, but these are due to the lack of industrial planning by its governments and the lack of foresight and investment by its corporations, as well as the self-harming actions against Russia and its trade surrender to the US, not any Chinese “overcapacity”. The European oligarchy and their courtiers wish to blame others for their own failings, while intensifying their exploitation and extraction from the general populations rather than making the sacrifices and doing the hard work required to rebuild Europe’s productive forces. Instead, they work to accelerate its fall while stuffing their bank accounts to even more overflowing levels and doffing their caps to their US imperial master.

The Chinese have many avenues for retaliation, with so many European companies dependent upon the Chinese market or upon Chinese suppliers. As the above article also notes:

Many Chinese companies view Europe as an “optional” market, while the cost-effectiveness advantages of Southeast Asia, the Middle East, and Latin America are being rapidly validated.

Furthermore, resource allocation always has a priority. If the EU creates uncertainty, it will only accelerate one outcome: Chinese companies will more firmly allocate their capital, production capacity, and attention to markets that are more welcoming to them.

Hopefully, less addled minds will stand up and stop the EU self-harming push against China. Even the Economist is calling this “Europe’s latest excuse”, and notes:

What the leaders really mean is that they have a beef with China, whose formidable manufacturers are outcompeting European producers in many markets. Partly as a result of Chinese competition, Europe is gently deindustrialising: the share of value added in manufacturing is one percentage point lower than it was in 2018. Because the resulting lost jobs are in industries, most notably carmaking, that draw special attention from politicians, fear of the “second China shock” has become politically explosive. But in blaming China for their troubles, Europe’s leaders risk losing sight of their home-grown failings …

Yet Europe must recognise that erecting trade barriers with China only increases the need for reforms, because diversifying away from the cheapest supplier raises costs and harms growth. An economy of China’s size and stage of development will always have significant manufacturing exports. If Europeans want their industries to thrive, they should focus not on shutting out competitors but fixing their own house.

The neoliberal Economist of course gets the required policies of a European renewal wrong, but is very much correct that it is the Europe leadership that needs to get its house in order rather than blame others for its failings. Europe needs China much, much more than China needs Europe, and its Western European supremacist beliefs do not aid it in accepting the new reality. If its oligarchy and courtiers are not able to overcome such beliefs, the next decades will be ones of European economic decline and a fall into international irrelevance. With the possibility of a 1930s style anti-Russian delusional military escalation an increasing possibility.

The crisis is rapidly deepening for the German car industry that has seen sales fall in the US, suffered an accelerating decline in China, and is seeing a loss of market share in Europe as the Chinese onslaught there picks up pace. With the easy profits from Asia now gone and huge investments needed to move to electric vehicle production; with VW at the epicentre of the crisis. It is already selling off core assets to raise cash, such as its marine engine division, and is now looking at cutting nearly one in six jobs (100,000 out of 625,000) and to close four factories. The majority of the cuts will fall upon Germany. Any cash from asset sales and cost cutting will be rapidly eaten up by restructuring costs, as the FT notes:

VW’s plan to remove almost one in six of its 625,000 jobs and to close four factories emerged less than two days after the carmaker concluded a hotly contested auction for Everllence that drew interest from top private equity groups.

But any gains booked from the sale could be wiped out by the cost of implementing the new restructuring plan, making it unlikely that VW will boost shareholder dividends, said UBS analyst Patrick Hummel.

In China, VW is increasingly releasing models which are designed and built in China with Chinese architectures and components in a failing desperate bid to gain market share in the electric vehicle segment while massively discounting its falling sales of ICE vehicles; with those Chinese EVs also to be exported to other markets. One important shareholder has even proposed that VW produce some of its Chinese-designed cars in its German plants, to obviate the cost of developing new EV models for Europe. BYD has been looking for a second European plant to add to the one in Hungary, and it has had discussions with VW about taking over a German plant. The European trade machinations may greatly complicate and limit VW’s plans. One significant possibility is for VW to end up serving the markets outside its declining sales in Europe and the US, and even the open markets of the UK, Norway, Switzerland and Iceland, with vehicles designed and made in China, with South America served by its Brazilian and Argentinian plants. A recipe for the long-term decline of the German car industry. Over 40% of Mercedes global sales were in Asia in 2025, falling to only 30% in Q1 2026 with further falls in Q2, while its German made sedans are subject to a 15% tariff in the US. BMW had 35% of its 2025 sales in Asia, with sales in China falling nearly 30% y-o-y in Q2 of this year. With the onslaught of Chinese luxury vehicles in Europe only just getting going.