Authors: Kong Tianping, Joel I. Deichmann, Danijela Jaćimović
Affiliation: Institute of European Studies, Bentley University, University of Montenegro
Organization/Publisher: Journal of Balkan and Near Eastern Studies, Taylor and Francis
Date/Place: January 19, 2023
Type of Literature: Journal Article
Number of Pages: 19
Link: https://www.tandfonline.com/doi/full/10.1080/19448953.2023.2167164
Keywords: Western Balkans, Foreign Investment, Geo-economics, European Integration
Brief:
The European Union (EU) has faced various challenges, particularly since the Syrian refugee crisis and the ongoing Ukraine war, which have shifted focus away from the Western Balkans. This region’s need for investment has provided an opportunity for other regional and international actors to increase their influence. Russia, Turkey, and Gulf countries have taken advantage of the slow EU accession process to establish a more prominent presence in the Western Balkans. However, China’s influence is more visible due to its significant investments in infrastructure, particularly through its Balkan Silk Road initiative, which primarily focuses on transport, energy, and industrial production. While the EU remains the largest trade partner and foreign direct investor in the region, the Western Balkans’ investment potential has not yet been fully realized.
China’s growing role in the region lacks a formal policy and follows the “one country, one policy” approach. Initially, China focused primarily on larger European countries like France and Germany. However, with the establishment of the Central and Eastern European Cooperation (CEEC), China began adopting a more detailed approach to the rest of Europe. The first meeting between China and the CEEC promised a $10 billion credit line from the Chinese government to all CEEC countries, including the Western Balkans. The absence of strict regulations in Chinese investments, compared to the EU, has made the Western Balkans more receptive to Chinese initiatives. Serbia has become China’s most prominent investment target in the region, surpassing other countries. It has become a key partner for China in the Western Balkans and the CEEC as a whole. Despite ongoing growth, the trade volume between China and the Western Balkans remains insignificant, with the EU accounting for 70% of the region’s total trade. Nevertheless, the Western Balkans plays a crucial role in Chinese economic initiatives. For instance, Serbia serves as a focal point for the European Belt and Road Initiative and plays a central role in the China-Europe Land-Sea Express. The Budapest-Belgrade railway has become a vital component in the increasing trade between Europe and China, representing a significant part of Chinese infrastructure investment in the Balkans.
In addition to trade, the potential for Chinese investment in energy and transportation in the region is enormous, with Serbia being the primary focus of infrastructure investment. Examples include the acquisition of Tirana airport in Albania by Ever-bright Group and Friedmann Pacific Asset Management in 2016, as well as Geo-Jade Petroleum’s acquisition of Canadian oil producer Bankers Petroleum for €384.6 million, which granted full rights to develop Albania’s Patos-Marinza and Kucova oil fields. Similar projects have commenced throughout the Western Balkans, such as the Kicevo-Ohrid highway, Stanari Thermal Power in Bosnia, the Bar-Boljare highway in Montenegro, and the Možura wind farm, all reflecting the region’s deep need for improved infrastructure and direct investment. These projects also highlight the European Union’s inability to fulfill the region’s needs.
The increasing Chinese presence has attracted attention both within the Balkans and across Europe. The West has started viewing China’s entry into the region from a more geopolitical perspective. The European Union has expressed concerns about China’s presence, leading to more active rhetoric regarding the Western Balkans. High Representative for Foreign Affairs and Security Policy, Josep Borrell, advocated for the EU to become a genuine geopolitical player or risk Europe becoming a playground for others. Other countries, including Turkey, Russia, Iran, and the Gulf states, have also increased their presence. Russia, in particular, with its historical ties to the Balkans, has raised concerns within the EU, as EU foreign policy chief Federica Mogherini stated in 2017 that the region risked becoming a “chessboard” for geopolitical struggles between Russia and the West.
The economic role of these different states is crucial for the Western Balkans, especially since the West was slower in investing in the region compared to Eastern and Central Europe. The dissolution of Yugoslavia was the main reason for this delay, resulting in a slower start in relations with the new successor states emerging after the Yugoslav wars. This created an opportunity for countries like China to enter the scene. In 2021, the EU remained the dominant trade partner in the Western Balkans. However, China accounted for 11.6% of imports and received 3.2% of Western Balkan exports. Increasing trade requires robust infrastructure, prompting non-EU actors to invest in the region to enhance their share of regional trade, which is still largely dominated by the EU. Meanwhile, Western Balkan states have also taken steps to improve their position by promoting foreign direct investment (FDI)-friendly policies. These efforts are primarily linked to the European integration process, which remains the main economic lifeline for the region. However, the EU’s neglect has opened the door for external actors to play a role, and they have been welcomed by the Western Balkans, particularly due to the never-ending EU accession process.
The rivalry between the West and Russia since the Ukraine war has highlighted the extent of foreign influence in the Western Balkans. Russia has successfully waged a hybrid war in countries like Montenegro and North Macedonia, thanks to these countries’ dependence on Russian gas and the slow response from Europe in addressing their energy needs. Turkey has also utilized its soft power to achieve success, especially given its shared frustration with prolonged EU accession. Now, the concern in the West is that China’s increased economic presence may translate into political ambitions that could overshadow both the West and Russia. Some perceive this situation as a zero-sum game, where if China gains, others will lose. However, China has not shown any evidence thus far of wanting to engage in the region’s politics. China’s policy rejects importing political systems or exporting its own, and it refrains from intervening in domestic affairs. China sees the Western Balkans as a region within Europe and recognizes that its entry into the Balkans is only a part of its economic relations with Europe. However, if Europe continues to view China as a threat, it could damage these relations. Ultimately, the Belt and Road Initiative is a geo-economic project rather than solely a geopolitical one.
By: Omar Fili, CIGA Research Assistant
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