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Chinese Fireworks Seem To Ring In Creeping Balkan Influence

Fireworks explode during New Year's celebrations in Sarajevo.

When the skies above Sarajevo lit up one night last month in a rainbow of colors, local residents could be forgiven for wondering why. Few knew it was the Chinese New Year.

But the huge fireworks display and subsequent cultural-entertainment program were known in advance to the dozens of Bosnian officials who attended the celebration, a subtle sign of Beijing's growing imprint on the region.

While the former Yugoslav republics Serbia, Montenegro, Kosovo, North Macedonia, and Bosnia-Herzegovina are all looking down the path of the European Union, China is trying to pave its Balkan Silk Road.

"The fireworks were a small, symbolic example of Beijing's growing influence in the Western Balkans," U.S.-based Balkans analyst Jasmin Mujanovic says. "I don't think ordinary folks in the Balkans realize the extent to which China has, very quickly, become a factor in regional politics. But local elites certainly do."

The arrival of the Chinese in the Balkans was no accident.

In 2015, President Xi Jinping announced his $900 billion Belt and Road Initiative to reopen western trade channels that followed the ancient Silk Road to feed its national economy.

Part of the target route is the Western Balkans, where the bloody breakup of the former Yugoslavia in the 1990s left a handful of countries in economic tatters and in need of new financial sources to repair the damage.

The EU has poured time and money into the region, but analysts say it has lacked focus as it deals with internal divisions over how to fold in another wave of poorer countries while it still digests expansion rounds that brought in 11 Warsaw Pact and former Soviet republics in the past 15 years.

Moscow, which the EU has tried to steer away from the region, is seen as a traditional ally. But it's also looked upon with skepticism after five decades of Soviet influence.

Meanwhile, the United States, once heavily involved in the Balkans, appears to have turned inward, showing little of its previous interest.

"The integration process was the main EU stability mechanism for the region, an endeavor that is now backsliding due to challenges that the EU itself is facing and due to the questionable commitment of the remaining candidate countries," according to Nani Klepo, a policy and security analyst for DAVA Strategic Analysis.

"Therefore, most of the Western Balkan countries are now in dire need of an alternative ally that can offer closer cooperation and capital flows," she adds.

Big Loans, No Conditions -- For Now

Enter Beijing, which has used this weakness as the gateway to increased economic and political clout.

For sure, the EU is still the largest player in the Balkans, accounting for more than two-thirds of foreign direct investment in the region.

But Chinese banks, with the backing of the government at home, have swooped in to become the leading lenders in the region by providing quick and easy conditions that others aren't willing to risk.

Analysts say the rise in Chinese influence could risk driving a wedge between the Balkans and the EU, eroding the will among ordinary citizens and government officials to support and enact the difficult reforms the region needs to eventually join the bloc.

"China has fairly straightforward economic-political objectives across Eastern Europe: create the infrastructure necessary to extend its initiative in Europe, and where possible, trap weak local economies into debt dependency which will make them beholden to Beijing and give China a degree of diplomatic and political leverage," says Mujanovic, author of Hunger And Fury: The Crisis Of Democracy In The Balkans.

"China is not a 'balancing' element, it's another authoritarian power attempting to forward its own -- often quite destabilizing -- aims amid the vacuum created by EU and U.S. retreat and incompetence in the Western Balkans," he adds.

A worker adjusts Chinese and Serbian flags for the upcoming visit of Chinese President Xi Jinping on the site of what used to be China's embassy in Belgrade in June 2016.
A worker adjusts Chinese and Serbian flags for the upcoming visit of Chinese President Xi Jinping on the site of what used to be China's embassy in Belgrade in June 2016.

In Serbia alone, Chinese institutions lent about $3 billion to projects between 2007 and 2017, including the Mihajlo-Pupin bridge spanning the Danube, a high-speed rail link between Belgrade and Budapest, and the purchase of the Smederovo steel plant.

The Serbian Ministry of Infrastructure has put the total value of projects under negotiation with Chinese financiers at about $6 billion, with many Chinese firms obtaining contracts through the pipeline as part of the terms of financing.

The flow of money doesn't stop at the Serbian border.

Chinese companies are helping build a highway in Montenegro that will eventually connect the port of Bar with the Serbian capital and a sea bridge in southern Croatia.

Looming Debt Traps?

Most recently, lawmakers in Bosnia approved a guarantee for a Chinese loan to help a project to expand a coal power plant in the northeastern town of Tuzla even though the EU's energy watchdog said it would violate the bloc's subsidy rules.

The Western Balkan states "have welcomed the much-needed aid, trade, and investment flows, which are increasing steadily, and in some areas rival the European Union's economic influence," according to analysts in the 2019 Munich Security Report, published in February.

That rise in influence has caught the eyes of EU officials, who have voiced concerns over whether the bloc has underestimated Beijing's growing sway in the Balkans.

Johannes Hahn, the EU commissioner responsible for negotiating with countries wanting to join the bloc, told the Financial Times in an interview earlier this month that he was concerned that some Balkan countries were borrowing heavily from China to pay for infrastructure and raising the risk of long-term damage to their fragile economies.

Alan Riley, senior fellow at The Institute for Statecraft in London, agrees. He worries that the Balkans will be drawn into a web of loan financing for which there is "no realistic prospect of economic return" and only greater debt loads, thus increasing Chinese influence.

"For countries across the region the safest and most effective way to deal with China is via the EU," he says.