Discomfort in the South: Western competition with China in the Balkans

In 2021, Montenegro’s economic infatuation with China has left it on the brink of financial collapse. The country’s first refund of dollars944m the road construction loan from the Export-Import Bank of China was expected to be released in July. And failure to pay this loan could have had disastrous economic consequences. For example, a payment default could have triggered contract clauses that led to the seizure of infrastructure assets by China’s state bank. Therefore, some sort of reckoning seemed to be in sight. But after many political discussions dramatwo American banks and one French came to the rescue.

Suddenly, Western observers were forced to recognize China’s attempted economic takeover of this NATO member state: politicians immediately organized hearings in the European Parliament, and summoned workshops on the issue; the European Commission and key member states rushed to organize briefings with experts; and, in due course, research organizations wrote in-depth “big picture” analyzes attempting to reshape Western policy in the face of the crisis. Ultimately, creeping Chinese appropriation of the European Union candidate country was prevented. And this should give rise to a more structured and convincing Western approach.

China’s strategy

Signs of Beijing’s advance toward Southeast Europe have long been clear. Perhaps the most obvious of these is the transformation of Serbia into a regional state. hub for China’s activities and development of various energy and infrastructure projects across the Western Balkans. But there are smaller dynamics at play, such as Beijing’s continued interest in the maritime sector. Infrastructure along the Adriatic coast and the gradual expansion of its diplomacy beyond economic affairs.

Political factors also spurred the implementation of China’s strategy in Southeast Europe. These include the continuing geopolitical impasse in the region, the lack of a clearly defined EU response to third country activities in this region and recent suspension of Montenegro’s accession process to the EU. At the same time, Western Balkan countries continue to need effective policies and tools to close their development gap with the rest of the continent, providing further incentive for China to be more open. For most people in the region, the resurgence of geopolitical competition is the new normal. And for many, this change should be welcomed.

Signs of Beijing’s advance in Southeast Europe have long been clear

However, Beijing is starting to encounter major difficulties. It has lost the advantage of discretion, now that China’s activities in the region – including the terms committed to various forms of engagement with the country – have attracted the attention of politicians, protesters and researchers. The NATO accession of countries such as Albania and North Macedonia has completed several areas cooperation with China – such as critical infrastructure, 5G technology, data and e-governance. It can be argued that European Union investments plan for the Western Balkans is a late and insufficient political response. But it was formulated in direct response to Chinese involvement and will go some way to addressing the shortage of high-quality infrastructure in the region.

At the same time, popular discontent is growing with China-related projects. For example, civil society organizations organized a blockade in February 2022 to protest against the construction a tire factory in Serbia; Bosnian coal miners staged a strike in December 2021 in opposition to labor rights and the environment. standards in an establishment based in Tuzla; and non-governmental organizations have long been concerned about the environmental impact of a highway construction project in Montenegro.

Furthermore, Beijing has traditionally felt more comfortable dealing with de facto autocratic regimes (such as that of Serbia under President Aleksandar Vucic and that of Montenegro under the reign of President Milo Djukanovic) and well-established governments (that of North Macedonia under the VMRO). But in recent years, China has faced power transitions in North Macedonia and Montenegro. The new governments of the old country have inclined their foreign policy more firmly towards the West, while – as mentioned above – Podgorica relied on Western banks to contain the potentially dramatic consequences of a default on its enormous Chinese debt.

The Western response

Elements of a more coherent Western response are emerging. The aforementioned EU economic and investment policies plan for the Western Balkans has the potential to become a new targeted development framework. And the adoption of the strategically minded EU Global Gateway initiative is a notable sign of the shift in political thinking on infrastructure and its importance in the new geopolitical normal.

At the national level, the new German government has asserted its commitment to the region, adopting a broader geopolitical perspective. France, for its part – as President of the Council of the European Union – adopts a similar approach. approach. Furthermore, we note the emergence of a constituency of members of the European Parliament determined to do more to counter the actions of China and Russia in the Western Balkans.

Further, the Biden administration has increased US engagement in the region, both building on previous policies (the “Clean Network” initiative in critical infrastructure) and expanding into new territories with the adoption of punishments targeting individuals destabilizing the region. The creation by the G7 of the “Rebuilding a better world” program Partnership”, with the decisive contribution of the United States, indicates a deeper shift in strategic thinking about regional influence.

But China is unlikely to be deterred by a change in Western approach. Geopolitically, Beijing hates irrelevance – and will perceive a decline in its influence and partial displacement as an affront. Therefore, China has launched various efforts to respond to the changing context in the Western Balkans and beyond. One of them is a tilt towards “greening” agenda in the Belt and Road Initiative and the 16+1 cooperation format with Central and Eastern European countries. Another one is bigger to focus on small and medium-sized businesses, as China recognizes the limitations of only engaging with large companies. After Lithuania’s departure from the 17+1 system, Beijing is visibly shift its focus on the Western Balkans. China has also learned to operate in more complex political environments, as demonstrated by the expansion of its diplomatic activities in Bosnia.

Meanwhile, Russia’s war against Ukraine could lead to deeper Sino-Russian cooperation in the Western Balkans and could accelerate EU and NATO efforts to integrate countries in the region. Neutral foreign policy positions, such as Serbia’s, now risk becoming untenable.

Overall, as China faces headwinds after years of operating in a largely permissive environment, it is also readjusting its approach in the face of increased geopolitical competition. In the struggle between the West and China in the region, the game is now on.