war on the rocks

The Unexpected Regional Player in the Balkans: China

November 29, 2017

While I was working in the Serbian Foreigna Ministry in late 2012, a delegation of researchers from a Western think tank came to interview the Serbian diplomats about their perception of regional security. A question was asked about the Chinese role in the region. One of my superiors replied that while Serbia took pride in having a healthy, friendly political understanding with China, he did not see China as playing a particularly meaningful role because neither Serbia nor any other Balkan country had much to offer a rising global power like China.

Now, that is all changing.

With the launch of the “One Belt, One Road” InitiativeChina has become a player in the Balkans to an unprecedented degree and in a way that differs significantly from the other powers in the region. One only needs to follow the money to see China’s more active Balkan presence. In 2014 China pledged to all the countries of Eastern and Central Europe, including the Balkans, an investment fund of $3 billion alongside the $10 billion credit lines that were promised a year earlier and intended to support Chinese investments. In the past, this level of investment would have been inconceivable, but with the European Union reluctant to expand to the Balkans, China is more active in the region than ever before.

With China poised to create a network of infrastructural connections across Eurasia through the One Belt, One Road Initiative, the Balkan nations have a newly valuable asset to offer China: their geography. China views the Balkans as a lynchpin between the Mediterranean and Central Europe and as a geopolitical bridge between the Western world and wider Eurasia. As such, while Westerners have generally viewed the Balkan region as a nuisance —  an ethnically fragmented territory on the periphery of the Euro-Atlantic world — China thinks of the Balkans as a conduit to European markets, as well as a way to project its soft power and buy friends among new E.U. members and potential membership candidates.

Balkan countries have embraced a number of Chinese infrastructural projects that run contrary to the European Union’s model of competitive tenders regulated by precise E.U. legislation. Instead, these investments resemble the Chinese model of state-owned enterprises being allocated projects based on political bargaining. This also makes China a political and normative threat to the European Union’s position in the Balkans, weakening these countries’ political resolve to follow the European Union’s lead. As long as the European Union is unable or unwilling to integrate these countries, however, they will gain further incentive to pursue closer ties with China.

Historically, Chinese interactions with Balkan countries were never especially deep. Mao’s China and Tito’s Yugoslavia had a complicated on-again, off-again relationship buffeted by Mao’s frequent accusations of ideological revisionism against Tito, and by the two nations’ competition for influence in the Third World. China’s close ties with Enver Hoxha’s Albania symbolized cooperation between two isolated communist regimes trying to be autonomous from Moscow. During the Yugoslav Wars, China tried to have a neutral posture while abiding by the U.N. Security Council resolutions. However, the Kosovo War of 1999 and the destruction of Chinese Embassy in Belgrade by the U.S. Air Force seemed to confirm Chinese misgivings about the post-Cold War international system. The war rekindled Chinese disdain towards the U.S.-led unipolar order, and the military unilateralism and ideology of liberal interventionism that underpinned it.

After the Yugoslav Wars, China prided itself on enjoying a friendly relationship with the Balkans, but the ties that developed were generally bilateral and focused narrowly on areas like trade. In 2005, China and Croatia agreed on “a comprehensive cooperation partnership,” which sought to promote closer ties between the two countries in areas like trade and culture. In 2009, Serbia signed a strategic partnership agreement with China, proclaiming China “the fourth pillar of Serbian foreign policy” alongside the European Union, the United States, and Russia. In doing so, Serbia sought both to emphasize the importance of China’s support on the issue of Kosovo and to seek commercial opportunities for its under-performing economy. In 2010, Serbia initially wanted to boycott the Nobel Peace Prize ceremony honoring Chinese human rights advocate Liu Xiaobo, as a sign of solidarity with China, though it gave in later under heavy E.U. pressure. In 2008, as Greece was in crisis, COSCO Group, the Chinese state-owned shipping and logistics company, gained a 35-year concession to operate the container port within the Greek port of Piraeus.  (While Greece is not generally seen diplomatically and politically as a part of the Balkans since it is a member of NATO and the EU, geographically it makes up the southern tip of the Balkan peninsula.)

In 2012, China developed an initiative known as “16+1,” intended to promote Chinese cooperation with 16 countries of Central and Eastern Europe, including the Balkan countries of Serbia, Montenegro, Albania, Macedonia, Croatia, Bulgaria, and Bosnia and Herzegovina. However, despite all these initiatives, no one perceived China as a major strategic player in the Balkans, largely due to geographical distance. China was seen purely as a bilateral partner with whom occasional transactional and/or technocratic cooperation took place in areas like trade, not as a country that played a major role in the region’s geopolitics through military and diplomatic presence or through economic statecraft.

Today, however, the geographical logic of Chinese overtures towards the Balkans is evident if one just looks at the map and draws a line connecting the countries into a single territorial whole. This line ranges from Greece across Macedonia and Serbia and into Hungary. Greece is considered a platform for maritime access to both the Middle East and North Africa. Macedonia is the geographical heartland of the Balkans bordering Greece, Bulgaria, Albania, and Serbia. Serbia borders the landmass of the Balkan Peninsula to the south, while in the north it connects to the plains of Central Europe. This makes a neat geographical and territorial string that throughout history has been the target of geopolitical competition for local nations and external great powers. For China, this region is an inroad into the heart of Europe.

Starting in 2016, the character of China’s involvement in the Balkans began to change. That year, COSCO Group acquired a 51 percent stake in the port of Piraeus. In Macedonia, Chinese state-owned Exim Bank has provided loans for the construction of two highways by Chinese contractors. Also in 2016, Chinese President Xi Jinping visited Serbia, where he signed an agreement that resulted in what Serbian officials estimate to be 5.5 billion Euros worth of investment in the country’s infrastructure. In Albania, China has been making similar investment overtures, as it perceives that country as part of the “Maritime Silk Road.” In Montenegro, the Exim Bank is financing — through a loan — an upgrade of the highway that connects the port city of Bar with Serbia, despite warnings from the World Bank and the International Monetary Fund that the project endangered the small Balkan country’s fiscal stability.

China’s approach to the region is different from those of the other players involved. China does not intend to engage in ambitious nation building like the European Union, it does not want to have a military presence like the United States has through NATO, and unlike Russia it does not want to act as a spoiler power trying to derail Balkan countries from joining Western institutions. China simply offers political friendship through pragmatic bilateral cooperation and by writing checks badly needed to repair the Balkan countries’ decaying infrastructure. In this way, China buys political sway within the Balkan capitals, while at the same time pushing forward with One Belt, One Road, connecting themselves with European markets and compensating for the slowdown in the Chinese economy.

China’s more assertive role in the Balkans has caused a stir in the European Union. China is not regarded as a geopolitical rival in the same rank as Russia. However, the European Union sees China as a political and normative threat because the investments it offers to do not comply with the European Union’s regulatory and environmental standards. As such, E.U. members believe China is diluting the Balkan nations’ resolve to follow the European Union’s lead by embracing its policies and regulations. For their part, economically and socially depressed Balkan countries like Serbia know they will not be joining the EU in the foreseeable future. As a result, China’s short-term solutions to development problems outweigh the long-term political considerations about European Union membership. Furthermore, unlike the E.U. funds, such as The Western Balkans Investment Framework (WBIF), which are frequently burdened with long waiting procedures and severe compliance restrictions, all of the mentioned Chinese investments are allocated based on swift decision making, without any strict compliance requirements. That way, Balkan leaders can use Chinese loans and investments to improve their infrastructure and promote themselves domestically in front of constituents, without abiding by strict compliance regulations in areas like the environment that are difficult and expensive for the poor Balkan countries to follow.

In Smederevo, Serbia, China’s state-owned HBIS Group bought a steel mill that used to be owned by U.S. Steel, and  the local workforce has raised questions about questionable adherence to labor laws and safety standards. Workers have complained about secret contracts with individual workers, minimal safety standards, inadequate maintenance, and non-existent contracts between employees and owners in contrast to the days when the American investors ran the facility. The highly touted Chinese construction of a high-speed railway between Belgrade and Budapest has been put on halt by the European Union, due to the project’s questionable financial viability and its violation of the European Union’s regulations on infrastructure tenders. In Macedonia, news leaked in 2015 that Chinese bids for infrastructure projects were marred with corruption. This helped precipitate a political crisis that eventually ended the 10-year rule of Prime Minister Nikola Gruevski. In Bosnia and Herzegovina, the Chinese-sponsored and Chinese-built coal plant has been met with accusations of seriously breaching local and European environmental regulations. Indeed, China is building coal plants across the region that are environmentally dangerous due to carbon emission, in contrast to the European Union’s commitment to reducing carbon emissions and closing coal plants.

Meanwhile, Serbian Ambassador to China Milan Bačević praised the Sino-Serbian “Iron Friendship”, while Serbian Deputy Prime-Minister Zorana Mihajlović called Serbia “China’s biggest partner in the Balkan region.” As the European Commission noted in 2016, Serbia’s willingness to align itself with the European Union’s foreign policy has declined. Similarly, Macedonian President Gjorge Ivanov is warning the European Union that its failure to make the Balkans part of the Union is leaving an open door for Russian and Chinese influence.

These trends suggest that as Western Europe sidelines Balkan nations, they will be less inclined to coordinate their policies and regulations with those of the European Union, instead embracing projects that violate E.U. standards.

Interestingly, Russia has been silent on China’s influence in the Balkans. The most likely reason is that there is no history of mutual rivalry between the two in the region, China being too far away and not having the historical experience in the region that Russia does, and because Russia cannot match China’s economic weight. Russia probably sees Chinese economic and political sway with the Balkan capital as useful as it weakens the attractiveness of Western institutions in the Balkans. This all fits within a general trend of Balkan countries happily accepting overtures and opportunities offered by non-Western players whenever they feel a lack of genuine effort by the European Union to integrate the region.

Nevertheless, one should not overstate Chinese influence in the region. First, although the One Belt, One Road Initiative, if fully implemented, will decrease the geographical distance between Beijing and the Balkans, China will still be too far away to exercise influence in the same way as the West does. Second, while China is looking for commercial and cooperation opportunities, it does not want to get involved in local rivalries and disputes. This became evident in 2010, when China  —  previously a supporter of Serbia’s effort to seek an advisory opinion from the International Court of Justice on the legality of Kosovo’s independence —  refrained from delegating its own judge in the proceeding. While this did not significantly harm China’s cooperation with the Balkan countries, it speaks to the Chinese tendency to show restraints in disputes where its own national interest is not directly involved. Third, unlike Russia, China is not interested in derailing the European Union’s incorporation of the Balkan countries. Rather, it encourages that process because it thinks this will make its own investments safer, and it views engagement in the Balkans as a way of boosting ties with the European Union. Balkan leaders should not fall into the trap of perceiving China as the alternative to the European Union.

Finally, despite the growth in Chinese investments, Balkan countries remain more economically dependent on the European Union than on China. E.U. investment in the region outweighs that of China. As the recent report from European Bank for Reconstruction and Development suggests, despite the increase in Chinese investments, the Balkan region “remains firmly anchored in Europe.”

While Chinese influence in the Balkans should not be exaggerated, it is higher now than at any other time in modern history. China has become more active in the Balkans primarily by capitalizing on the fact that the European Union failed to prioritize the Balkans, keeping it on the sidelines. The European Union nonetheless still holds greater leverage in the Balkans. It is still the region’s largest trading partner, accounting for 76 percent of all trade. The cultural and social ties between E.U. countries and the Balkan countries are incomparably stronger than those with China, and geographical proximity favors the European Union as well.

However, to use all of these advantages, the European Union needs to behave less like a bureaucratic and technocratic player and more like a geopolitical and strategic actor. This means that the European Union must engage the Balkans with more urgency and attention, based on careful political and strategic assessment of every country individually. The European Union must mobilize its own financial instruments more swiftly and make them available to the Balkan countries so they can address their dire development problems. It must do so while at the same time being more understanding of the fact that the impoverished countries of the region will not be able to follow the same standards as its most developed members. Finally, the European Union should send a strong political message that these countries will join the union eventually, to avoid fomenting insecurity that plays into China’s hands. Without these steps China and other external players will continue to punch above their weight in the Balkans, leaving the West puzzled and frustrated.

 

Vuk Vuksanovic is a PhD researcher in International Relations at the London School of Economics. He previously worked at the Ministry of Foreign Affairs of the Republic of Serbia and as a political risk consultant in Belgrade. He writes widely on modern foreign and security policy issues, and is on Twitter @v_vuksanovic.

Image: Xinhua/Ma Zhancheng via China People’s Daily