The vulnerable periphery of the EU: China in the Western Balkans

By Dr Yatharth Kachiar and Priya Poojary,

Montenegro, a NATO country on the outskirts of Europe in the Western Balkans, has become the latest victim of China’s ambition to gain global influence. It is also proving to be a critical test for the European Union to counter China’s growing weight in its strategic backyard. In 2014, the small mountainous country took out a massive $ 1 billion loan from China for a 165 km road development project that would link its port city of Bar to Belgrade, the capital of Serbia. The initial phase of the project which covers 41 km of road construction started in 2015. At present, while Montenegro’s tourism dependent economy is battered due to the pandemic, the repayment of the first installment of the Debt to China that is owed this month has become a source of concern.

Interestingly, before China decided to invest, all of the major global financial institutions such as the IMF and the European Investment Bank had refused to finance the project after two major feasibility studies questioned the economic viability. of the project. Chinese government to step in and fund the project. Here the question arises: why would China want to invest in a high risk, low feasibility project?

It’s not the economy, but the geostrategic positioning

For China, investing and gaining influence in a NATO country that aspires to be part of the EU is a huge strategic victory. Although the terms and conditions of the loan to Montenegro are not yet clear, similar loans to other countries like Sri Lanka required a land and infrastructure guarantee. Beijing has repeatedly used this strategy of seducing economically weak countries with easy investments and ultimately tied them to the debt trap and forced loyalty. Earlier in April, the Montenegrin government asked for EU help as its national public debt hit 103% of GDP.

In addition to the economy affected by COVID, Montenegro’s public debt situation worsened due to a decline in Russian investment in the region after 2014. Debates over the financing of the project have been deeply polarized. The EU warned early on about the socio-economic, environmental and financial effects of Chinese investments in the country. Montenegro is in talks with European and American banks to swap or refinance the Chinese loan. How the EU responds to the Montenegro crisis would set the tone for future Chinese engagement in the region.

EU-Russia-China power struggle in the Western Balkans

The European Union

The Western Balkan region has become a powerhouse of competing interests intertwined by the EU, China and Russia. Located on the periphery of Europe, the Western Balkans have always occupied a critical geostrategic position within the European and transatlantic security architecture. After the dissolution of Yugoslavia, as ethnic tensions and civil war engulfed the region, the EU became more actively involved with the countries of the Western Balkans to ensure peace and stability. Since then, the EU has facilitated peacekeeping and peacebuilding activities in these countries and provided economic and military assistance. At the Thessaloniki summit in 2003, the EU moved closer to the Balkan region by offering these countries the possibility of joining.

However, almost two decades after the Thessaloniki summit, Slovenia and Croatia are the only Balkan countries to have obtained EU membership. In the Western Balkans, Albania, North Macedonia, Serbia and Montenegro are still candidate countries for the EU accession process, while Kosovo and Bosnia and Herzegovina have expressed interest in joining the EU. ‘EU. In recent years, development needs and growing fatigue from the EU enlargement process have pushed countries towards Beijing.

Russian interest

Likewise, the region is of immense strategic importance to Russia for several reasons. First, the region constitutes a crucial energy supply route given its geostrategic location between the Black Sea and the Mediterranean Sea. Since the 1990s, Russian energy companies have occupied a prominent place in the Balkan region, making states dependent on Russia for economic reasons. Second, the Western Balkans is the region in which Russia seeks to present itself as a credible political, economic and military “alternative” to the Euro-transatlantic duo. He critically observed NATO’s growing presence in the region and attempted to shift its allegiances to Moscow, away from Brussels and Washington. Third, the countries of the Western Balkans serve as a vital historical and cultural link with Russia, sometimes reinforced by Russian public diplomacy efforts.

China’s ambitions

China complements the existing spiral of competition in the region. China’s economic presence in the Western Balkan countries is framed by Beijing’s power in roads, railways and the energy sector coupled with concessional credits. Although China’s economic merit in the region is low, it is slowly emerging as a debt partner for most of the Western Balkan countries. China’s economic policies and investments in the Western Balkans directly contradict the EU’s financial and environmental policies. It is also a direct threat to the fundamental values ​​of the bloc, such as democracy, the rule of law, respect for human rights and good governance. Therefore, it weakens the process of EU integration with the Western Balkans. Indeed, Montenegro has become a vivid example of Chinese debt trap diplomacy, as the country is due to be repaid this month. Beijing could thus be able to make crucial decisions on the financial fate of the country if it does not meet its obligations.

Need for the EU to intervene

Compared to Beijing and Moscow, the EU maintains political, economic and institutional links with the Western Balkans through treaties, accession agreements and regular summits. However, the growing clamor from Chinese and Russians in the region is of great concern to the EU. The Montenegrin government’s request for help from the EU has once again drawn attention to debates over China’s growing presence in the EU’s immediate neighborhood. The EU has clarified that while it is ready to help Montenegro with sustainable financing, it is out of the question to bail out countries. However, leaving Montenegro to fend for itself in this critical juncture could send a message to the rest of the belt countries that the EU is not serious about them.

How the EU responds to Montenegro – whether by bailing it out or ignoring it – will shape the bloc’s existing relationship with the Western Balkan region going forward. Moreover, the persistent development gaps between the region and Brussels will only strengthen China’s grip on the EU periphery over the coming decades.

(Dr Yatharth Kachiar is Assistant Professor and Priya Poojary is Senior Lecturer at the Manipal Center for European Studies (MCES), Manipal Academy of Higher Education (MAHE), Manipal, Karnataka. Opinions expressed are personal and do not reflect official position or Financial Express Online policy.)

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