In late May of this year, Lithuania announced it would not participate any longer in the 17+1 format initiated by China to promote its Belt and Road Initiative (BRI) in Central and Eastern European countries. Affirmations by Chinese authorities emphasize that it is a cross-regional “cooperation based on voluntarism, extensive consultation,openness a nd inclusiveness” and that it has “brought tangible benefits to the nations involved and added a new dimension to China-EU relations” (Lau, 2021). The 17+1 format includes now all ten Eastern EU members plus Greece and the five states in the Western Balkans. The official idea behind this format is to provide the region with loans, transport and telecommunications infrastructure investments promising mutually beneficial economic cooperation with China. Feared by many in the EU and the US, the 17+1 format is often cited as another example of the waning Western power on the global stage. In the latest publicity stunt, China has sent free Covid-19 vaccines and masks to the Western Balkan states (Lau, 2021). Nevertheless, the question is warranted if such fears are based on facts.
China’s 17+1 format in the region: blowbacks to a geopolitical scheme
Underlying the relationship between Central and Eastern European countries and China is the geo-economic and geopolitical project of the BRI. These countries are significant in a geopolitical view because they are the gateway to the EU – and hence, at the same the European single market. The states in this region are in need of large-scale infrastructure programs and China is willingly investing to gain a foothold there creating regional cooperation frameworks along the way (Vangeli, 2017).
In the larger framework of the BRI, the 17+1 Format plays an important role to build infrastructure, and beyond, as Chinese companies participate in construction projects in the energy, communications and automobiles sectors which has led to market asymmetries to the detriment of domestic companies in the respective countries and – contrary to Chinese narratives of inclusiveness – no such effects have materialized (Richet, 2019). Promised levels of mutual trade were not met, and most of the increase was in Chinese exports which outnumber imports to China six-fold, as well as lacking investments from Beijing except in the Western Balkans (Turcsanyi, 2020).
Looking at the sheer numbers, it turns out to be a geo-economic tool that undermines the principles of a purely free market approach. No competition between market participants takes place and the states run large negative trade balances with China in spite of ample Chinese investments (Ciurtin, 2019). The Chinese method in striking deals can be described as development and contract capture (Shopov, 2020). The first aims at investments in significant infrastructure projects to retain influence over whole “development process”; the latter aims at contractual stipulations between governments containing “hidden linkages, excessive compensation mechanisms, or jurisdictional traps” (Shopov, 2020). Thus, by capturing the development process, China turns into a major lender and can make demands to the borrowing state as a dependence is created. Contract capture, on the other hand, ensures some sort of compensation to a Chinese enterprise in case a contract is revoked by the other side. Indeed, this has prompted some participating EU member states to relinquish or suspend joint activities with the expectation to obtain more from available EU funds (Ciurtin, 2019).
A recent investigation confirms that China’s lending practice is not a pure development aid mechanism of goodwill. Contrarily, Chinese loan contracts encompass extraordinarily wide confidentiality clauses preventing borrowers from unclosing the terms or even the existence of these loans. Furthermore, these loan contracts state that Chinese state-owned banks have to be reimbursed on a priority level and that China can cancel loans or expedite repayments if Beijing dissent with the borrower’s policies (Gelpern, 2021). Hence, China can turn their loan contracts into political weapons to literally blackmail other states into aligning them towards Beijing’s will.
Such unsavory practices applied in large energy and infrastructure projects throughout the region have curtailed the Chinese penetration. For instance, the plan to connect the port of Piraeus to Central European markets has suffered some setbacks from the Western side. In 2017, Germany has blocked the construction of two highway corridors through the Western Balkans citing concerns about the economical sense of the project (Caffarena, 2019). Earlier this year, the Chinese COSCO shipping company failed to increase its stake in the port of Piraeus which would have strengthened Beijing’s decision-making power and improved its profitability through the dividends distributed (Glass, 2021). This is certainly a blow for the Chinese as Piraeus had been selected to become China’s transshipment hub for the Mediterranean and Black Seas (van der Putten, 2016). In the latest 17+1 summit headed by Chinese President Xi Jinping, six member states (the Baltic states, Bulgaria, Romania and Slovenia) did not even send out their highest-level representatives (Lau, 2021).
In 2019, at a similar moment where the initiative seemed to have run out of steam with diminished enthusiasm from the European members, Chinese authorities carefully staged Greece’s entry into the 17+1 format to resuscitate the withering momentum. The motivation for Athens to align might have had to do with a sense of being left out and losing influence in the Western Balkans, which is considered a sphere of Greek influence, as the 16+1, and later, the American Three Seas Initiative (for more, see below) were established without Greece (Ciurtin, 2019).
Chinese vs American geopolitical interests
The 17+1 format can be seen as an example of typical Chinese probing behavior in Europe. It is not a direct confrontation with a large power in the region yet it challenges indirectly the US which has acquired a role of regional hegemon there, particularly, because the EU has failed to exert more influence through unrealistic policy approaches at a time of relative American withdrawal after the Yugoslav Wars. Hence, China having perceived a lack of resistance from another large power has sought to insert itself into a region that has traditionally never had a hegemon of its own (Maçães, 2018). From an American point of view, China’s activities in the region have been viewed with suspicion, especially ventures by the Chinese communications company Huawei in NATO allies are eyed suspiciously because of feared information-security threats (Radio Free Europe, 2019).
Thus, as a counteraction, the Three Seas Initiative is a US-backed political cooperation spanning twelve EU member states from Central and Eastern Europe between the Baltic, Adriatic, and Black Seas, including the very same member countries of the 17+1 format. It wants to improve regional collaboration with support to infrastructure, energy and interconnectivity projects founded in 2015. In 2018, the US revealed the ‘Partnership for Transatlantic Energy Cooperation’ to stimulate private investment. Funding comes also from EU which had been initially skeptical as it suspected an American attempt to undermine its authority (Werner, 2019). That the geopolitical environment is essential can be gleaned from American statements that they aim at “increasing (their) diplomatic, military, commercial and cultural engagement” in the wider region to counter “increase(d) pressure from Russia and China” (Office of the Spokesperson, 2019). As a result, trade between the US and the Three Seas Initiative members has increased since 2017, including large-scale deals of US military equipment, and the region’s defense spending has also grown in the same time (Schou Tjalve & Holm, 2020). A further field of the Three Seas Initiative to bolster cooperation covers the energy projects to build a North-South corridor in Eastern Europe in order to decrease dependence on Russian gas. The US seeks to export its own gas to the region, hence, the LNG (Liquefied Natural Gas) terminal in the Polish Świnoujście is being expanded and the Floating Storage Regasification Unit (FSRU) planned to be built in Gdansk – one is already being built in Croatia – would be complimented by the FSRU in the Greek port of Alexandroupoli (Wójcik, 2020).
US engagement as a model for the EU
For the EU this could mean the opportunity to finally re-launch its activities in the (Western) Balkans and fill a power vacuum that has been filled by Russia and China. Starting accession negotiations with North Macedonia and Albania would be a first step. The largest obstacle in this area has been France and Bulgaria which would need to be convinced by appropriate means. The longer the states in the Western Balkans remain in limbo, the less likely reforms and democratization will become. The American investments in different types of infrastructure as part of a larger framework with concrete objectives, the Three Seas Initiative, could serve as a model for European development aid. The EU’s recovery fund may help the states in Eastern Europe to overcome the looming economic crisis and convince governments to intensify their collaboration in the Western bloc.
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By Mahmoud Refaat: The European Institute for International Law and International Relations.
