The EU stands up to the investments of China and Russia in the Balkans

The EU's High Representative for Foreign Policy, Josep Borrell (right) speaks with Croatian Foreign Minister Gordan Grlic Radman, this Monday in Brussels.Olivier Matthys / POOL / EFE

The new Chinese silk road and Russian Sputnik V vaccine diplomacy have run into the blue and stars of the European flag in the Balkans. The European Union is leading a counteroffensive after the incursion of Chinese and Russian investments in the countries of the former Yugoslavia that aspire to join the community club. Brussels wants to stand up to the presence of third parties that can destabilize the area politically or economically. The community plan includes the mobilization of up to 28,000 million euros in financial aid and comes at a time when the area is beginning to suffer from the unsustainability of Chinese loans to build infrastructure or from the instability attributed to initiatives inspired by the Kremlin.

"Our commitment to the Western Balkans must be made visible and leave no doubt," said Josep Borrell, High Representative for Foreign Policy of the EU, after presiding this Monday a meeting of the Council of Ministers of Foreign Affairs of the Union that has focused on analyzing the situation in the countries of the former Yugoslavia that are not part of the EU.

This group (Serbia, Montenegro, Albania, North Macedonia, Bosnia-Herzegovina and Kosovo) oscillates between the never fulfilled aspirations of European integration and the temptation to strengthen ties with other powers such as China, Russia or Turkey.

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Borrell has assured that it has been "a long discussion because the region plays a special role in Europe and for Europe." The ministers have reaffirmed that the six countries are called to join the EU (Serbia and Montenegro are already negotiating accession, although with little progress; and Albania and North Macedonia received the green light to do so in March 2020), although the goal This Monday's meeting in Brussels was not to analyze enlargement, but how to strengthen relations and deal with interference from third powers in the area.

"When the EU is not actively and visibly present in the region, its leaders look the other way and political space is left with interests different from those of the EU and sometimes conflicting," says the

non-paper

prepared by the Borrell's department for the meeting. "A strong EU presidency is the best way to prevent the western Balkans from distancing themselves," adds the document, which recommends that the visits of high community officials to the area and the invitations to regional leaders to visit Brussels be multiplied.

The community counterattack includes an important economic component because international interference often comes through investments or credits that generate dependence on the area of ​​foreign powers. The most relevant case at the moment is that of Montenegro, a country on the verge of bankruptcy due to the interest on a Chinese loan to finance the local part of a highway that connects its Adriatic coast with the Serbian capital, Belgrade. The loan, signed by the previous government and whose first payment is due next July, amounts to 1,000 million euros, almost a fifth of the country's GDP. The Montenegrin government has even asked the EU for help in the face of the risk of financial collapse in the country, whose economy has been hit hard by the pandemic because of its dependence on tourism.

"We know that the loan from the Chinese Export Import Bank has created a difficult situation for Montenegro and is an issue that worries the EU," they point out in the department of Olivér Várheli, European Commissioner for Neighborhood and Enlargement.

The same source adds: "The EU cannot repay the loans of a third party, but we are studying how we could help Montenegro."

The case also worries about a geostrategic variable.

A newspaper published that the guarantee of the loan - of which many details have not been made public - is the Adriatic port of Bar. Although in similar cases Beijing has chosen to renegotiate or forgive debt, it could mean that a second port in the Balkans ends in Chinese hands.

In 2016, Greece sold the one in Piraeus to the Chinese port operations giant COSCO.

Brussels wants to avoid a repeat of this situation in the future and in its budgets for 2021-2027 it already has a game of 9,000 million in subsidies to finance, among other things, transport, energy or digital infrastructure projects. The Commission also offers a guarantee system that can mobilize up to 20,000 million euros of credits under favorable conditions through the European Investment Bank or the European Bank for Reconstruction and Development.

The plan appears poised to collect the first significant chunk by securing funding for the modernization of the railway line between Belgrade and the North Macedonian border. The section is part of a project considered crucial for the economic integration of the area and seemed on the verge of falling into the hands of Chinese investment. The so-called Corridor X leaves from Salzburg (Austria) and crosses the Balkans to its final destination in Thessaloniki (Greece). The EU is already involved in several tranches, with funding for technical preparations, in addition to the one from Belgrade to North Macedonia.

"The EU does not pretend to have exclusivity in the area, but it is important that we continue to be the main actor," says a diplomatic source in Brussels. The economic preponderance of the EU in the Balkans has never been in real danger, because European investment (on average 60% of the total in the six countries concerned) far exceeds that of China, Russia or Turkey, and the same situation is It is repeated in commercial relations (60% of the exports of the six countries are destined for the European market).

"Chinese economic activity in the area is not as significant as people in those countries believe, but the important thing is the trend," says Allison Carragher, political economist expert on the Western Balkans at the

Carnegie Endowment

think tank

, by videoconference from Zagreb

. "Although the EU is still by far the first economic partner for these countries, China is growing and occupying the second place that others, such as Russia or Turkey, used to have"

The EU observes with growing concern what is described in Brussels as "interference and interference" by third countries. The raids come in the form of vaccines (such as Russia's Sputnik V and China's Sinopharm, which have been acquired by several countries in the area and have helped Serbia to rank among the most immunized countries in the world) or Chinese financing for public investment (for worth about $ 9.1 billion between 2010 and 2017, according to the European Investment Bank). "We want to reduce the dependence that the area is taking on some third powers," said a diplomatic source before the Council meeting on Monday.

One of the problems lies in the difficulty of measuring this dependence. “Often times, the original debt for a Chinese loan is refinanced when the country issues bonds in local markets to cover it. So what was originally a debt with China appears in the statistics as a debt with the markets, ”explains Carragher. This presence is especially evident in the sectors of heavy industry and transport, a priority for Beijing to be able to export goods to central and western Europe.

Another challenge is the vicious circle that is generated. The lack of prospects for EU entry in the short term (requirements were tightened last year under pressure from France) motivates the Western Balkan countries to forge other alliances which, in turn, further distance them from the EU . In Bosnia, for example, Parliament approved a Chinese loan to expand a coal plant in the city of Tuzla, despite the fact that it would violate the subsidy rules of the community club it aspires to join.

The environment is, in fact, one of the elements that could slow down the dynamics. The protests of neighbors and environmentalists have recently prompted Montenegro to launch its first state investigation into possible environmental damage in a river protected by UNESCO by the Chinese highway builder. And Serbia has halted works by the Chinese company Zijin on a copper mine in Bor and the production of a Chinese-owned recycling plant near Zrenjanin, also for environmental reasons.

Some countries in the region accuse the EU of double standards for worrying about economic relations that it maintains itself, and of greater importance. "When someone tries to give us lessons about our relations with these countries [in reference to China and Russia], the only thing we would like to hear is what the difference is," Serbian Foreign Minister Nikola Selakovic said in an interview. with this newspaper last week in Madrid. "The difference," says Carragher, "is that they are countries with a weak rule of law and in some cases authoritarian tendencies, so they are more exposed to the risk of negative consequences than positive ones of this economic activity."