Vuk Vuksanovic, The Spectator
Stretching across a tranquil Balkan valley, Montenegro’s first highway traverses rocky land with unnatural precision: a modern concrete creature that contrasts with the stony panorama of the Dinaric Alps.
Hanging on one of the large gray pillars stands the distinctive red flag of the small country, a golden eagle with two heads in the center. The project may have been a symbol of the new post-communist state. Those who live in the village below know who really stands behind the highway.
The Socialist Republic of Yugoslavia already belongs to history, but the communists are back. Montenegro is trying by all means to repay a $ 1.2 billion Chinese loan for the construction of the highway, which aims to connect the Montenegrin port of Bar with neighboring Serbia.
Most of the project remains incomplete. Now the country’s debt has risen sharply, reaching 103 percent of GDP, with Beijing owning nearly a fifth of it. It was hoped that the high-speed highway would prove to be a vital regional trade link.
Montenegrin roads are known for their scandalous condition and frequent accidents. But Western financial institutions were reluctant to support the project, as they were less convinced of its effectiveness.
Instead, the Chinese bank Exim provided a large loan to the Montenegrin government, while the Chinese state-owned company China Road and Bridge Corp was hired as a contractor to carry out the works. The construction of this highway was a nightmare from the beginning.
Thanks to the rough terrain, the engineers planned to build a total of 40 bridges and 90 tunnels. Delays quickly became a norm. Now the inevitable allegations of corruption have further weakened the project, which from the beginning had weak support.
The work, which was not undertaken by the Chinese company, was subcontracted by a local company affiliated with President Milo Djukanovic. UNESCO has criticized the project for the harmful environmental effect on the protected Tara River.
The EU, meanwhile, has until recently refused to help debt restructuring, even though the country is continuing the bloc integration process. Montenegrin society was shocked by the behavior of Brussels. There are now reports that Brussels has contacted German, French and Italian banks in the hope that they can save the small Balkan country through indirect financial assistance.
Local officials have expected some problems to emerge in each case, but they reckoned that subsequent economic growth would absorb most of the debt. But as with many projects, the pandemic has had unpredictable consequences.
Montenegro is an economy, which is highly interdependent on tourism. With holidaymakers banned from visiting the Adriatic Sea, the economy shrank by 15 percent of GDP. Last year’s elections brought a new government, ending three decades of illiberal rule by President Djukanovic’s party.
There are 2 ways China can now move forward. The first is the so-called “debt trap diplomacy”, where China gains direct access to the most vital infrastructure of a country that is unable to repay its debt.
Thus, in 2017 China took over for 99 years a strategic port in Sri Lanka along the Indian Ocean. The same can happen with the port of Bar in Montenegro. China already owns the Port of Piraeus in Greece, Europe’s seventh largest port.
The second strategy is to offer Montenegro debt restructuring. But in return, China will seek Montenegro’s political allegiance. This loyalty would mean more work for Chinese state-owned companies, and voting in international institutions in favor of China.
After all, Montenegro is a NATO member state. In either case, China wins, and Europe loses. Of course, there is sound business logic in the EU’s reluctance to help Pogdorica repay a debt involving third parties.
And officials in Brussels have suggested that even if they tried to restructure the debt directly, the Chinese would try to block their movements. However, the issue of Montenegro is not a matter of trade contract law, but a geopolitical issue. When it comes to China, the European Union is not facing an actor who plays by the technocratic rules set by the Brussels bureaucracy. But he is dealing with a growing global power, which is using economic power to expand its global influence on the Eurasian super-continent, including its European edge.
Europe is showing the Balkans that it is ready to criticize co-operation with China, but it is also showing that it is not ready to help correct mistakes. In late May, Chinese President Xi Jinping held a telephone conversation with Djukanovic, where bilateral ties were discussed.
Unlike the EU, China knows it has influence over Montenegro, and is analyzing what is the right way to use it. Brussels realized too late that he too could call Podgorica. The EU must demonstrate that it is capable of defending its interests while sending a message to the Balkans that Europe is on its side. Otherwise, Montenegro will be an easy prey for China, and with it the EU’s strategic credibility. /abcnews.al
