China, Russia and the USA are using the corona pandemic to strengthen their positions in the Balkans, although their divergent interests threaten both the region’s EU perspectives and its long-term stability.
Over the last two months, the corona pandemic has thoroughly changed the world in many different ways, on the global, regional, local and individual levels.
One of those changes has been the accelerated return of geopolitics, as manifested in the Balkans by China, the Gulf states, Russia, Turkey, and the US, who have been using medical assistance, political and PR moves to pursue their interests and strengthen their positions, with the mediation of some of their new (or old) allies in this volatile region.
These geopolitical moves are undermining the Balkans’ EU perspectives, and with it the region’s long-term stability, since for the past two decades hopes of EU membership have been the main, if not the only protection against the potential chaos underlying the region’s unresolved ethno-political issues.
The EU response to this challenge was initially marred by a major blunder, as EU countries blocked exports of their medical equipment to other member and non-member countries, triggering furious criticism, from Italy and Spain, to Albania and Serbia.
Feeling shunned by the EU, in one of the most precarious moments of recent history, may prove to have been the last drop in the Balkans’ overflowing bucket of frustrations and dismay, and the final proof to local leaders that their interests will be better served in alliance with some other foreign actors.
At the end of April, the EU eventually corrected its course and provided a whopping €3.3 billion package for health, economic and social challenges in the Balkans. Yet this intervention may be coming too late for at least a part, if not all of the Balkans, where the EU has lost much – if not all – of its influence.
In recent years, months and weeks, the region has been slipping away from the path towards the EU and its democratic practices, and turned towards autocracy, nationalism, corruption and other foreign influences.
While EU leaders and officials are still pondering what further steps they should take in the region, most of them still do not seem to grasp the urgency or the seriousness of the situation. Even those who are aware of the risks seem to be at a loss as to what to do in the difficult and troubled region where – as some of them believe – they have already tried everything.
Whether because of the EU’s ignorance, its own mounting internal problems, or because of the Balkans’ traditional complexity, the region is still far from the top of the EU agenda. The EU seems to have forgotten how dangerous the Balkans can be – for itself, the continent and the entire world – when divergent foreign influences rekindle the region’s unresolved national, religious and ideological differences.
The most flagrant such example happened more than a century ago, when the Austro-Hungarian Archduke Franz Ferdinand was assassinated in Sarajevo on June 28, 1914, which triggered the start of World War I.
The Balkan powder kegs smoulder again
As this anniversary draws near, the geopolitical situation in the Balkans seems to be ever more complicated and dangerous.
In addition to the new health, security, economic and social challenges caused by the pandemic, the region is witnessing a rekindling of many of its old problems, such as rampant corruption and internal ethnic & political divisions. Furthermore, most of the Balkan countries are already gearing up for elections this year, adding yet another flammable ingredient to the volatile concoction.
Many experts and reports have been pointing to the serious democratic downturn in the region.
“The breakdown of the democratic consensus has been most visible in Central Europe and the Balkans, which experienced the greatest gains after the end of the Cold War,” warned the Freedom House’s global ‘Nations in Transit’ report, published on May 6.
The report noted a considerable decline in democratic practices in Montenegro and Serbia, as well as in the EU member Hungary. These three countries were “no longer democracies,” the watchdog organisation concluded, and added them to the group of ‘hybrid regimes’ with the rest of the Balkan countries.
The latest developments across the region have added more reasons for concern.
In recent days alone, Albania has seen clashes between the police and opposition supporters and activists over the disputed demolition of the National Theatre in Tirana. The demolition was carried out overnight, against the advice of EU officials and their efforts to find a compromise solution. The subsequent violent protests reflected growing tensions between the ruling and opposition parties.
Similar tensions are simmering in Montenegro, where the ruling regime of Milo Djukanović has been facing off against the opposition parties and the Serbian Orthodox Church, ahead of the parliamentary elections scheduled for the end of the year. The situation is no better in Serbia, where supporters of the ruling and opposition parties have been holding reality show-style protests against each other, while gearing up for parliamentary elections in June.
In Bosnia & Herzegovina, a complete political deadlock has been blocking the formation of a new government in the BiH Federation entity for some 18 months now, since the 2018 general elections, and is also preventing the adoption of the 2020 state budget. The latter will delay Bosnia’s upcoming local elections, which have currently been postponed until November, but will be delayed even further until the state budget is adopted.
In both Kosovo and North Macedonia, the governments’ efforts to control the coronavirus pandemic have from the very beginning been overshadowed by political and personal battles. North Macedonia is also distracted by the preparations for its general elections, while in Kosovo the Constitutional Court is set to rule on the recent controversial toppling of the government and indicate how a new government should be elected.
The EU is squandering its influence in the region
The local and regional power struggles in the Balkans have been augmented in recent years by various global actors, which have exploited the steady decline of EU interest and influence in the region to strengthen their positions and pursue their individual interests.
Since the early 2000s the Balkans have been yearning to join the EU, which was supposed to provide the region with more job opportunities and better living standards. Yet equally important was the fact that only EU membership could fulfil another Balkan dream; to enable all the region’s ethnic groups to live with their ethnic kin within the same borders.
It has been this second motive that made the EU the only option able to guarantee the region’s long-term stability and enable the gradual transformation of its nationalist ideals. All other options, meaning the absence of the EU and the presence of divergent foreign influences, would inevitably add fuel to the local ethno-political quarrels, thus destabilising the region in the long run.
Nevertheless, in recent years the enlargement process has gradually screeched to a halt.
The region never fully recuperated from the impact of the 2008-9 global recession, and its readiness and capacity for economic and social reforms weakened as politicians and politics became more and more conservative.
The global recession has strengthened conservatism and undermined internal cohesion within the EU too, which has weakened the Union’s readiness to accept new members.
As a result, the accession process – which was both the EU’s technical toolbox and its only strategy in the Balkans – has become an exercise in bureaucratic procrastination, a game in which the Balkan countries pretended to still be willing to reform while the EU pretended to be ready to accept the new member states.
The Balkan summits in Sofia and London in May and July 2018 were the turning point, as they revealed that enlargement into the Balkans had effectively, albeit not officially, been taken off the table. At those meetings, the EU leaders – increasingly troubled by their problems back home – would not even allow use of the word ‘enlargement’, using terms like ‘connectivity agenda’ instead.
The Balkan leaders got the message loud and clear, and started turning more and more towards their historic allies: the Serbs towards Russia, and the Bosniaks towards Turkey and the Gulf countries – as well as towards the new, wealthy kid on the block – China. The Albanians, on the other hand, had always been linked much more closely to the US over the past two decades, but America’s new, chaotic foreign policy under Donald Trump threatens to change that too.
Global actors use the pandemic to strengthen their Balkan grip
The new European Commission appointed at the end of 2019 seemed to be aware of the growing trouble in the Balkans, and appeared determined to restore at least some of the influence the EU has lost during the time of the previous Commission. Yet its efforts have been interrupted by the coronavirus pandemic, and the EU’s initial abysmal reaction to this difficult challenge made things only worse.
On the other hand, China and Russia proved once again to be better at the game of winning over Balkan hearts, and used the situation to gain additional leverage in the region by sending masks and other medical equipment early on.
Their assistance – in line with their strategic orientation in the Balkans – focused on Serbia, the biggest country and biggest market in the region. Serbia’s President Aleksandar Vučić did not spare the theatrics in thanking China and Russia for their aid, as it helped the country to fight the coronavirus while at the same time boosting his own popularity ahead of the elections.
China and Russia proved once again to be better at the game of winning over Balkan hearts.
With every new planeload, Vučić and other Serbian government officials made major public displays of gratitude, while Russian and Chinese flags, as well as billboards boasting ‘a friendship of steel’ with China and ‘historic relations’ with Russia lined the streets of Belgrade.
On the other hand, this assistance raised many eyebrows. Some experts warned that a significant portion of the Chinese aid deliveries seemed to be of poor quality, or that it was superfluous. Others questioned why the Russian health assistance was being coordinated by the Russian Ministry of Defence, why it includes military personnel, and why these military teams were allowed to move across the country, and even into Bosnia’s Serb-dominated entity of Republika Srpska, without any oversight or control.
In neighbouring Kosovo, meanwhile, America was also using the pandemic to pursue different but equally self-serving and potentially even more detrimental tactics. Thanks to the direct intervention of Richard Grenell, the acting Director of the US National Intelligence, the US Ambassador to Germany, and the Special Presidential Envoy for Serbia and Kosovo Peace Negotiations, the government of Albin Kurti was toppled in Kosovo on March 25.
Grenell pushed for Kurti’s removal as he was standing in the way of a US-sponsored agreement intended to at least nominally resolve the dispute between Serbia and Kosovo. The no-confidence vote in Kurti’s government opened up a new and complicated legal and political crisis in Kosovo, which is threatening to undermine Kosovo’s ability to deal with the health, economic, social and all the other consequences of the pandemic.
Over the last two months Serbia, Kosovo, Bosnia and all the other Balkan countries eagerly awaited and carefully counted the planeloads coming from China, Russia, Turkey and the Gulf states, as they meant not only a difference in fighting the pandemic, but also indicated the status of each country in relation to a different global actor.
The EU comes back strong, but is it too late?
The EU eventually realised that China’s ‘mask diplomacy’ and Russia’s military-driven health assistance was threatening to undo years of the EU’s strong presence in the Balkans.
On March 26 EU leaders finally agreed to set dates for the start of negotiations with Albania and North Macedonia, yet this move was too little and too late to make a major difference.
This step, which for the EU was just a small technical move, but which it nevertheless delayed, had been eagerly awaited by these two countries and the rest of the region for years – but it was almost completely buried under the avalanche of reports related to the fast-spreading pandemic.
At the same time, EU leaders are still withholding the visa-free regime for Kosovo, despite the fact that the European Commission has proposed this already back in 2016, having concluded that Kosovo’s authorities had met all the agreed criteria. People in the Balkans see these and many similar cases as examples of the EU’s own inconsistency, duplicity and constantly changing criteria.
On April 29, the EU came back strong, announcing a massive package of financial assistance for the region. This included €38 million of immediate support to the health sector, as well as exclusive access to EU instruments and medical equipment; almost €1.2 billion euro in aid funding for the region’s social and economic recovery; and almost €2.2 billion to support businesses and public sector investments.
EU officials in Brussels, as well as around the EU and in the Balkan capitals, also stepped up their communication efforts to make sure that the Balkan peoples and their leaders understood that the Union still cared for the region.
The news was welcomed across the Balkans, although in Serbia it was still overshadowed by the Serbian government’s ever more emotional reactions to the much smaller gifts coming from China and Russia.
The fact was not lost on Western officials and local experts. Many of them have expressed concerns that Vučić may have ‘passed the point of no return’ – that he may have concluded that, at least during his reign, Serbia’s future looks brighter in alliance with China and Russia, rather than with the EU.
The EU tried to further restore its position in the Balkans by holding a virtual Balkan summit on May 9, an event that was originally supposed to take place in Zagreb as a part of Croatia’s presidency of the EU.
The joint declaration which the EU and Balkan leaders adopted during the conference reiterated “unequivocal support for the European perspective of the Western Balkans”, and stressed that the EU’s support to the region went “far beyond what any other partner has provided.”
Yet by the end the Balkan leaders and their citizens remained clearly unimpressed by the event, whose biggest achievement seemed to be the fact that it was held in such a difficult situation, and which, once again, deliberately avoided even mentioning the word ‘enlargement’.
As EU leaders and officials now ponder how to move on with the pledged assistance, including the conditionality that will be applied, experts say that the Union is still far from securing its position in the Balkans, warning that they cannot afford to lose it.“The European Commission promises €3.3 billion to help the Western Balkan countries mitigate the impact of the pandemic and bring them closer to the EU. Without a fundamental change of direction, however, this initiative comes too late,” a leading Balkan expert Dušan Reljić said in his analysis published on May 5.
By Srdjan Majstorović | Belgrade
The European Commission published its Country Report for Serbia in May 2019 assessing the country’s progress in the past year: it portrays a confusing picture of a country that is perceived as a frontrunner in the EU accession process, has been involved in accession negotiations since 2014, and which yet obviously lacks any drive to reform, ambition, capacities, and most importantly the results that could prove its advanced status.
Since the People’s Republic of China began its One Belt One Road (OBOR) initiative, there has been much discussion on how this initiative would affect the countries it covers. The main goal of this project, as proclaimed, is to increase connectivity between China and other markets through the development of infrastructure and eliminating transport choke points.
This would enable a higher level of economic cooperation by reducing the costs of freight transport and the time necessary for the goods to reach their target markets. However, does this economic project come with political strings attached? Would China be able to leverage this new influence in Serbia and the Western Balkans, and thus gain a strong foothold in Europe?
Would China be able to leverage this new influence in Serbia and the Western Balkans, and thus gain a strong foothold in Europe?
I argue that much of the discussion in this area is either misplaced at present, or overlooks the real reasons why Chinese influence is rising in the WB and particularly Serbia; and I offer a list of policy recommendations that would make Serbia more resilient to this influence.
Loans passed off as investments
Whenever Serbia’s President Vučić discusses infrastructure projects that involve Chinese partners, he always depicts them as ‘investments’. In a country where media freedom is severely limited at best, these reports have been picked up by the media and widely disseminated, without any fact-checking. One should also understand why the country’s president – a figure who has no constitutional role in the conduct of economic or foreign policy – has been so vocal in promoting Chinese influence: Mr Vucić, as the president of the most important party in the country, has been able to dismantle almost all institutional checks and balances and put almost all state institutions under his political control ‘à la Orbán’.
Hence, Chinese investments in the country seem to be multiplying; this sheds a good light on the current regime, which bases its legitimacy on economic issues, making public finances stable and promoting economic growth. Growth is probably the most pressing issue in the country; public opinion polls show that the vast majority of citizens regard the overall economic situation, unemployment and low salaries as the most pressing matters to be addressed.
Furthermore, the sluggish growth in the previous decade stemming from the weak rule of law means that Serbia was only able to regain its 2008 pre-crisis GDP per capita level in 2016. However, in reality the true level of Chinese investments in Serbia is very low. Apart from two already completed acquisitions (the Smederevo steel mill in 2016 and the Bor mines in 2018) and one big investment that has been announced for the near future (a car tyre factory in Zrenjanin), there are few Chinese investments in the country.
But these investments are strategically located; the cities of Smederevo and Bor are almost completely economically dependent on these facilities. Since these two companies incurred substantive losses when in government hands, the state was more than happy to sell them off to interested investors. However, it seems that this process was not transparent or fair, since the names of the buyers were effectively already known before the tenders were completed. Although the Chinese companies are there to make a profit, their influence can also reach higher political levels, as they are among the most important economic players in that region of Serbia.
But since their total stock is very limited, the Chinese economic presence in Serbia is overall rather modest in actual numbers… Serbia is just a springboard for reaching the more developed, and therefore more important, markets in the EU. This is well reflected in the fact that Serbia, which is not yet a member of the WTO (so its trade barriers are higher than in other comparable countries), has signed free trade agreements with all its important political and economic partners (including the EU, CEFTA, Russia and Turkey), in addition to China.
Less bureaucracy, more appealing loans
For the time being the loans from the Chinese government are being used to fund infrastructure projects. The overall infrastructure in the country needs to recover after two decades of low investments: during the 1990s, military conflicts swallowed up most of the state’s financing capabilities, and public investments were the first to be cut after the 2008 economic crisis.
This is well portrayed in the Global Competitiveness Report 2018, which ranks the quality of the roads in Serbia as 95th in the world (out of 140 economies listed). To respond to this need for infrastructure investment, multilateral financial institutions such as the World Bank, the European Investment Bank and the European Bank for Reconstruction and Development have provided significant assistance and loans. However, these institutions were more concerned with projects of international importance, such as the international E10 highway running from Budapest to Sofia or Thessaloniki, than with those of local importance, such as the E11 highway from Belgrade to Bar.
Furthermore, these institutions have rather strict regulations, including financial supervision and auditing, while construction companies need to pass well-designed tender procedures. Therefore, there is little room to siphon off funds. Meanwhile, the public procurement system in Serbia is notorious for its corruption scandals, many of which have been connected to government-sponsored infrastructure projects. China does not labour under these constraints.
The only condition Beijing has is that a Chinese company will get most of the construction work at the price determined beforehand, without submitting to any tender procedures. A smaller part of the work goes to local sub-contractors, also without a public tender, so that the local partners can also gain a (smaller) piece of the pie. For a political elite well-versed in political clientelism, this is a win-win situation. This is what mainly explains the attractiveness of the Chinese investment loans in the region. The interest rates on the Chinese loans are not that important.
For most of the loans the interest rate applied is 2-3%, a figure similar or just slightly higher than the rates applied by the international financial institutions. The interest rates on government bonds have recently also declined significantly (Eurobonds for 10-year loans in 2014 carried a rate of 5.5%, while in 2018 the rate was 3.5%, and the most recent Eurobond carried 1.6%).
So, since there is no big difference between direct state financing and Chinese loans, the latter are actually probably more expensive, because there is no pressure on costs from the competition, in the absence of tender procedures.
The actual level of Chinese loans is still low
In some countries, the Chinese infrastructure investment loans were renegotiated when the total debt level became unsustainable. Since the Chinese took over the Sri Lankan port of Humbantota in 2017 in a debt/equity swap, there has been rising concern over whether this situation could also occur in other countries, such as Zambia, but also in Serbia. If the government proved unable to meet its rising obligations to its Chinese partner, would the latter then take over some important infrastructure, or increase their political leverage in the country in some other manner?
The level of Serbia’s public debt is still high, but it is not yet at an alarming level. The fiscal consolidation measures put in place in 2014, together with the higher growth rates of the economy that followed curbed the level of public debt, whose share in GDP significantly decreased. Furthermore, the share of Chinese loans in total government debt is rather low, making up just €895 million euros, or just under 4% of the total public debt. But if the lack of bureaucracy or checks on how the money is spent makes Chinese loans appealing, why have there not been more of them?
The answer is: because the level of discretionary power which politicians have over regular loans financed through the international market is already significant – they can spend the money only in line with local regulations, which are easy to disregard or circumvent. Therefore, the Chinese loans are only being used in place of financing from international financial institutions.
A strong economy with limited soft power
Chinese soft power in the country is still weak. Many different initiatives regarding cultural, educational and scientific cooperation have been started, but these are restricted to a rather limited number of experts. The two Confucius Institutes in the country (in Belgrade and Novi Sad) are active in these fields (especially regarding language training), and have for the time being avoided entering into political debate.
Chinese state media does not have a local media affiliate, but is content with a cooperation agreement with a local radio station in Belgrade, which rebroadcasts their programmes on Chinese culture. The number of Serbian nationals working or living in China is also rather limited (most of them are teachers of English), so their perspective on the country does not affect how most Serbs perceive China.
The main drivers of Chinese soft power in Serbia are the fact that the Asian giant is perceived as a strong and growing economy, as well as the political support that China has provided to the Serbian government by not recognising Kosovo as an independent entity. Therefore, the wider population perceives China as a benevolent actor that supports Serbian interests – something which could easily be used as political leverage.
Serbia as a future Trojan horse inside the EU?
An important argument mentioned by regional policy experts, and even by high-ranking politicians such as Johannes Hahn, the EU Commissioner for European Neighbourhood Policy and Enlargement Negotiations, is that the rising Chinese influence in the country could make Serbia a Trojan horse within the EU. This is a valid argument, but it is based on false premises: Serbian accession to the EU lies in the rather distant future, and the Chinese have much more important friends who are already inside ‘fortress Europe’. First of all, there is rising anti-accession sentiment within the most important EU countries, such as France. As Nathalie Loiseau, the top candidate of La République en Marche party for the EU elections stated during her visit to Belgrade as French Minister for European Affairs in March 2019, there would not be a new wave of EU accession any time soon.
This is not only because of Serbia’s lacklustre track record in meeting EU criteria, but mostly because the EU itself is not ready for the accession of new members. Furthermore, if one wants to look for Chinese Trojan horses, one should not look at the gates, but beyond the walls. The two most important candidates for this title are Viktor Orbán’s Hungary and Matteo Salvini’s Italy.
Both these countries are dissatisfied with certain EU policies, and are trying to establish strong political connections with non-Western stakeholders. Both countries are also vying for Chinese investments and loans, although this economic segment is probably more important for the Italian government, due to the sluggish performance of the Italian economy and weak public finances.
Hence, overemphasising Serbian cooperation with China as a political problem could seem simply hypocritical and insincere, bearing in mind the much higher levels of cooperation between the EU core countries and China.
How can the West take on the Chinese challenge?
For the time being, it seems that the West has not been able to counteract China’s rising influence in Serbia, as well as in the Western Balkans. Brussels needs to make some strategy changes. It needs to communicate with the Serbian people (who still wrongly believe that Russia is Serbia’s most generous donor!), not just their government – something the US seems to have acknowledged too: the US Embassy in Belgrade has recently stopped focusing on the painful past or on Kosovo, and turned to future fruitful cooperation.
Overemphasising Serbian cooperation with China as a political problem could seem simply hypocritical and insincere, bearing in mind the much higher levels of cooperation between the EU core countries and China.
It should also not come as a surprise that few EU flags were spotted during the street protests against Mr. Vučić’s government in recent months. It is hard for Serbians to see the EU as a supporter of freedom, when the president of the European Council Donald Tusk called Vučić his ‘friend’ and ‘soulmate’ at a press conference.
The very technical language of accession reform conditionalities is hard to understand for the general public, whereas EU support for Vučić is plainly clear. The EU should place more emphasis on the rule of law and media freedoms in the country (most programmes so far have not produced any significant outcomes), as well as the centralisation of political power, which could be tackled through changes in election system and judicial appointments.
The Kosovo issue should be resolved as soon as possible, but on a more inclusive and participatory basis, in order for a long-term compromise to be reached. These changes would eliminate most of the factors that enable China, Russia and other external factors to exert their influence in the country. Mutually beneficial cooperation with these countries could still take place, but Serbian society would then be able to distinguish between opportunities and traps.
For the time being, the EU’s actions as an external factor in the region are not strengthening or developing local resilience to foreign influence, but are in fact supporting the very forces that are undermining it.
By Ana Maria Luca | Bucharest
In mid-February thousands of opposition supporters clashed with police in an anti-government rally against Albanian Prime Minister Edi Rama’s cabinet, demanding its resignation and early elections. Although Albania is set to start its accession negotiations with the European Union, Rama’s rule has backtracked in terms of democracy and the fight against corruption and organised crime.