The above analysis was first published on the International Institute for Peace website.
After the events in 2014 in Ukraine, namely the illegal annexation of the Crimean Peninsula and the military interference in Eastern Ukraine by the Russian Federation, many experts started to talk about the eruption of a new Cold War. However, this has been challenged again by many, who stated that the circumstances are now different and that we do not see a competition of capitalist versus communist ideology. However, another very influential actor into the geopolitical sphere gained attention. China. So, the tenor shifted towards the notion that there is something like a new Cold War, but it is not about the West versus Russia, but about the West versus China.
After it introduced its One Belt One Road initiative in 2013, economic investments have been the main tool for China in its foreign policy. Whereas China has been active in many African states for a long time already, as well as in EU countries, the engagement of China in the Western Balkan countries only recently attracted the attention of many observers.
So let us have a look at the context. In 2003, the European Union stated in its declaration of the EU-Western Balkans summit: “The EU reiterates its unequivocal support to the European perspective of the Western Balkan countries.” This has been a very important sign for the WB 6 (those not yet a member of the EU: Serbia, Montenegro, Albania, Kosovo, North-Macedonia, and Bosnia and Herzegovina) towards EU integration. With a possible EU accession, the hope of democratic and economic development, rule of law, human rights and better living-conditions arose within the societies in the region and Croatia in 2013 became a member of the EU. However, for the other WB6, the process of integration advances very slowly and there is still a huge gap in the socio-economic development between the WB and EU countries. With internal problems inside the EU – Brexit, democratic backsliding in some member countries, now the Covid-19 pandemic, migration influx, and instabilities in its neighborhood – a lack of interest of the EU in the region became obvious for the governments and the people. This disappointment with the slow process of integration, even though there have been incentives to step up regional cooperation e.g., the Berlin Process [1]which was launched in 2014, opens the door for traditional (Russia, Turkey) and non-traditional third actors (China and the United Arab Emirates).
Contrary to Russia and Turkey, who have historical and religious ties towards the region as well as geopolitical ambitions, China’s involvement in the Western Balkans is different. Investments in infrastructure, the energy sector and in communications follow their approach in foreign policy which culminates in the 1B1R initiative. The main aim is to create corridors to improve Sino-EU trade and to position itself as an indispensable international actor in the international arena. Therefore, the main value of the Western Balkan countries for Beijing lies in their proximity to the EU which is a major export market for China and not so much in the region`s countries themselves. China has been investing in many big infrastructure projects in the region, but for all the WB countries, the EU still is the leading trade partner accounting for almost 70% of the region’s total trade, whereas China accounts for less than 10% (between 6-10% imports and only 2-4% exports). Considering the lack of capital in the region and the ambitions to develop their infrastructure projects, Chinese investments are not per se a bad choice, so why should the EU bother about China’s presence?
What is China’s Strategy in the Western Balkans?
China already set up the 17+1 initiative where it tries to promote business and investment relations between China and 16 countries of Central and Eastern Europe. Although five of the six Western Balkan countries (Kosovo is excluded, as China has never recognized it and does not have official diplomatic relations with Pristina) are part of this initiative, China prefers a government-to-government approach dealing with each country on an individual level. Even though it cannot be stated often enough that the EU is by far the biggest investor in the region, China did step up its state-led economic engagement in various fields. Since the EU did refrain from several infrastructure projects in the region which are considered important for some countries, the possibility of Chinese investments gained widespread attraction. Contrary to the EU, which has a multilateral approach and introduces conditionalities in sectors like transparency, public procurement, fiscal rentability, rule of law, anti-corruption and environmental protection, China with its no-conditionality approach seems to be an attractive alternative. A concrete example is the Chinese loan to Montenegro to build Bar-Boljare Highway which is perceived as a chance to profit from the one Belt one Road initiative by the Montenegrin government. Considering the small size of the country, the huge amount of the EUR 670 million loan makes Montenegro owing 22% of its total foreign debt to China. Additionally, the negotiations have been perceived as non-transparent, contracts were assigned to Chinese companies – and China insisted that in case of disputes the arbitration would be in Shanghai. Moreover, the import of construction-material was excluded from taxation. China also acquired the Smederevo Steel Manufacturing in Serbia and built the Pupin Bridge in Belgrade. Another big project in Serbia is the Belgrade-Budapest railway which in combination makes Serbia the most important partner in the region for China. In Albania, Chinese privately-owned Geo-Jade Petroleum bought the Canadian company Bankers Petroleum which is the country`s largest oil producer. There are other big investments in infrastructure projects and in the energy sector in BiH and North-Macedonia.
Generally, Chinese investments in the region consist primarily of loans. The high expectations of the region, therefore, have not been met since Chinese foreign direct investments, which are comparably small anyway, did not really materialize in green-field developments, but rather in the acquisition of companies. The high debt of Montenegro puts it in a specific situation of vulnerability even though China delayed the first payback, which was due in July 2021, considering the economic difficulties with which Montenegro is confronted since the outbreak of the Covid-19 health crisis. China, therefore, is a “lending-power” not an “investment-power”.
Political and soft-power relations
Even though the Chinese approach towards the region is mostly economically driven, there is also a political side to the investments – for China and the region itself. Serbia, who is the most important partner to China builds upon a longer relationship. China does not accept Kosovo`s independence and the (unintentional) bombing of the Chinese Embassy in 1999 by NATO brought the countries closer together – already before the One Belt One Road initiative was introduced. In exchange, China is looking for support in the international arena when it comes to its disputed behavior in the South-China Sea, relations with Taiwan (which is not recognized by Serbia), the situation in Hong Kong and the treatment of the Uyghur population in Xinjiang. Western Balkan countries generally refrain from official statements condemning Chinese behavior in the above-mentioned contexts in the hope of future investments.
When the EU and the rest of the world was hit by the pandemic in 2020 followed by an export-ban of medical supplies, Serbia’s president Alexander Vučić took advantage of the general disappointment. He openly criticized the lack of solidarity of the EU, praised China and declared that Serbia would turn to China, who, as he argued, was ‘the only one who can help’. When doctors arrived in Belgrade from Beijing, Vučić kissed the Chinese flag, a picture which ended up on the front pages of Serbian media. Shortly afterwards, the EU announced it would provide Serbia with US$18 million in immediate medical support and US$94m in social and economic aid – far more than China gave and without a big media campaign. Serbia therefore tries to balance its interests and its negotiation position towards the West by having close ties to China, but also to Russia with which it has a long-lasting historical cooperation.
Another quite new Chinese approach in the region is trying to foster its image as a well-intentioned partner by setting up Confucius Institutes in all WB6, memorandums of understanding, building of schools and academic exchange. China is also setting up media cooperation to promote a win-win collaboration and to influence the public opinion towards the One Belt One Road Initiative. Moreover, China organizes study trips and cultural events which tend to become more institutionalized and finally part of its cultural diplomacy strategy. These developments have gained attention only recently and admittedly, they started from a very low base considering that China is culturally and historically far away from the region. But even if these activities show the multilayered approach China pursues in the Western Balkans, its relevance should not be overstated. The European Union does have far more leverage in this context, its relations are much more institutionalized, and the EU and NATO aspirations are still very high on the political agenda but also when it comes to the public opinion.
What does China’s presence in the Balkans mean for the EU?
China already became the third most important actor in the Western Balkans and the EU should not ignore China’s influence. China, contrarily to Russia, is not opposing the EU-path of the Western Balkan countries simply because the EU prospect creates more stability in the region which is important for Chinese investments. Even though China is trying to promote within the region, it has no strategy of exporting its ideology. The main goal is still to export goods to the EU and Central and Eastern European states via different routes using its main foreign policy tool – the 1B1R initiative. Expectations of a positive outcome of Chinese investments have been high in the region, but criticism from civil society organizations concerning corruption, environmental impact, and lack of transparency in public procurement, along with the lack of real foreign direct investments in greenfield developments, have curtailed the initial euphoria about China. Nevertheless, the region can profit from infrastructure projects. Chinese fundings are not a problem per se since investments are definitely needed. It can only be problematic when it hinders the EU path, when EU requirements are not met and when it – even if unintentionally – gives room for corrupt policies and if it hinders important reforms in rule of law. Especially important is the environmental situation considering that the Western Balkans are one of the most polluted regions in Europe. China does have an own energy policy which takes the climate crisis into account, and it also supports the Paris agreement. Yet, its investments in hydro and coal-fired power plants in the WB are detrimental to environmental protection and do affect the EU directly (pollution of its neighborhood) and indirectly (environmental migration). China eventually could have a positive influence on environmental protection by greening Chinese foreign infrastructure investments.
For the European Union, the Western Balkans are way more than an economic tool to boost trade. The EU has close historical, political, people-to-people, and economic ties with the region. The WB6 countries are encircled by EU countries, and the EU integration is still not contested by any member state, even though sometimes there are bilateral considerations which hinder the accession process. Additionally, they are also important for European security since it is the closes neighbor of the EU. The “no” of France, Denmark, and the Netherlands in 2019 to open accession negotiations with Albania and North Macedonia after they had introduced/carried out significant reforms, was a result of domestic considerations and left the population disappointed (in March 2020, Albania and North Macedonia were granted with the opening of accession talks). In order to be seen as a credible partner, the EU needs to stick to its commitments in its own interest and the interest of its neighboring region. Only if the EU manages to keep up its transformative power when it comes to its fundamental values, it can pave the way to change the countries into liberal and prosperous democracies based on rule of law and market economy.
A Way Forward?
The EU should have a pragmatic approach when it comes to China. Chinese investment can be beneficial to Europe if China also respects European interests – especially in the field of environment, human rights, and rule of law. The EU should enhance cooperation with China but on mutually beneficial terms. The EU Strategy on China states that the EU’s engagement with China will be principled, practical, and pragmatic, staying true to its interests and values. It could incorporate China-specific goals also in its enlargement policy and it can support civil society organizations which tackle aspects like environmental protection, workers-rights or fight against corruption. It is also important to use its political leverage when it comes to the fundamental values (art. 2 EUV) on which the EU is built upon: “The Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities. These values are common to the Member States in a society in which pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.”
Even though China does have an increased presence in the Western Balkans it is important to take note that the influence and investments of the EU does exceed those of China on a large scale and holistically. Unfortunately, the EU seems not to be able to make its engagement mor visible which opens room for other actors to fill this gap. Europe needs to reconsider its public diplomacy strategy. People in the region and within the European Union should be able to see and acknowledge the positive impacts EU-funding, its political leverage and its investments do have in the region. Support of independent Civil Society organizations can be one way to put pressure on political elites, but also official diplomatic relations – bi- and multilateral – should play a role to hold stakeholders responsible for their actions.
Yet, even if the EU is confronted on many different levels with internal and external challenges, it is not only the EU – or other third actors like China, Russia, or Turkey – who is responsible for the transformation of the Western Balkan countries into prosperous democracies. The first and most important actors are the leaders and governments in the region who, unfortunately, sometimes put their own good before the benefits of the society. Pressure on media freedom, corruption, nationalism and clientelism are just some of the internal problems, which hinder the path towards EU integration. So, frustration with the governing elites but also with the seemingly unwillingness of the EU to be tough on reforms while not pushing the region away is becoming a big concern for many civil society organizations working for a democratic region based on the rule of law.
It is very true that China can be a partner, but it is also important to understand that the main actors in the region for responsible policies are the people in power, the respective governments, its leaders, and in the end – not China. It is not another new Cold War what is needed, but pragmatism and partnership wherever it is possible – in line with the EUs values- to close the socioeconomic gap between the EU and its neighbors.
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