The Republic of Montenegro is the focus of the Communist Party of China’s Belt and Road project in Central and Eastern Europe. But not only is the Balkan country heavily indebted to China, the epidemic has also added to the country’s financial and economic woes. The CCP’s activities in the region have also become a focus of attention as all sides intensify their rivalries in Montenegro.
Debt burden increases as epidemic hits
The Republic of Montenegro recently asked the European Union to help repay about $1 billion in debt owed to China. The EU has refused, stressing its dismay at the consequences of Chinese investments and other activities there.
The Republic of Montenegro, located in the western Balkans, successfully joined NATO several years ago and is now actively seeking EU membership. Deputy Prime Minister of the Republic of Montenegro for Foreign Affairs and Security Affairs Abazovic said in late March that the EU could help repay China’s debt, which could reduce China’s local influence and help Montenegro’s state finances to function properly.
The economy of the Republic of Montenegro is dominated by the service sector and is particularly dependent on tourism. But the New Crown (CCP virus) epidemic has hit the local economy hard, and now the population’s income is falling and the risk of inflation is rising. In order to increase fiscal revenues, the cabinet of the new government of the Republic of Montenegro recently decided to increase taxes on cigarettes, soft drinks and other goods. The deteriorating economic and financial situation has made the Republic of Montenegro feel increasingly burdened by the Chinese debt.
The Balkan tourist resorts are dying for the Chinese Communist Party to see the opportunity to enter
After the end of the war in the former Yugoslavia, the Republic of Montenegro declared independence from its federation with Serbia in 2006. Similar to some other Eastern European countries, especially in the Balkans, Montenegro is facing a crisis of old and even near collapse transportation infrastructure. In addition, corruption among officials, coupled with an aging local population, massive emigration of young people and a severe labor shortage, have led to a prolonged downturn in local social and economic conditions.
Against this backdrop, the CCP signed a loan agreement with the Republic of Montenegro in 2014 to help build a small section of the highway from the Republic of Montenegro in the Adriatic seaport city of Bar to the Serbian capital Belgrade. This is seen as a key project in the CCP’s push for the Belt and Road Initiative in the Balkans, as well as the 17+1 mechanism between China and Central and Eastern Europe. The future fate of this Chinese road construction project in Montenegro is undoubtedly attracting increasing attention at a time when some Eastern European countries are now becoming less enthusiastic about the 17+1 mechanism and are beginning to raise critical questions or even intend to withdraw from it.
New government unhappy with Chinese company’s beachfront state land to cover debt
Montenegro’s mountainous terrain makes the Chinese company’s local road construction costs per kilometer among the most expensive in Europe. The Berlin-based New European Business Network said the cabinet of the new Montenegrin government has decided to sue the Chinese road and bridge engineering company responsible for the road construction. The new Montenegrin government is unhappy that the Chinese company did not follow the original design route, violated the law and endangered the local ecology, and damaged the environment of the UNESCO-protected Tara River during construction.
Deputy Prime Minister Abazovic said the Chinese-built road would not be completed as originally planned, and that the two sides may need to sign new agreements and invest money. He said Chinese debt is already up to one-third of the foreign debt Montenegro faces. But Abazovic denied that Montenegro’s new government has a negative attitude toward China. He claims that China still brings opportunities to the region.
According to media reports, if the Republic of Montenegro ends up being unable to repay its Chinese debt, the small Adriatic seaside nation will have to pay China with its own land as collateral.
The Center for Global Development, a Washington-based think tank, had published a report in 2018 warning that countries like Montenegro were at risk for owing too much debt to China as the Communist Party promotes the Belt and Road project.
Two forces face off in political turmoil
The focus on Montenegro’s burden of Chinese debt comes at a time when the local political ecology is beginning to change. After parliamentary elections late last August and local elections not long ago, Montenegro’s President Djukanovic’s Socialist Democratic Party, which has been in power for more than 30 years, has been weakened and his political opponents have united to form a new government cabinet.
The new government’s cabinet criticized Dukanović’s policy. The loans provided by the Chinese Communist Party and the agreements signed between the Communist Party and Montenegro were signed during Dukanović’s term of office. But at a 17+1 video summit between China and Central and Eastern European countries in February, Djukanovic said Chinese investors were still interested in road construction, as well as projects in logistics and industrial development zones along the highway. He said Chinese projects could provide a boost to the economic recovery of Montenegro and its surrounding neighbors after the epidemic.
The Republic of Montenegro several years ago accused Moscow of creating unrest and a coup there and expelled Russian intelligence officials. That sent relations to rock bottom. But Russians are also an important source of tourists for Montenegro’s tourism industry. Many Russian media have reported that changes in Montenegro’s domestic political ecology indicate a rise in pro-Russian and pro-Serbian forces there. As the new government’s cabinet gradually consolidates its power, Montenegro and Russia may be able to repair their relations. One possibility for Montenegro’s political direction is that pro-Russian and pro-Serbian forces will grow and that President Djukanovic will eventually lose power.
The Republic of Montenegro is separated from Italy only by the Adriatic Sea. From the Adriatic Sea, it has direct access to the strategically important Mediterranean Sea. After Montenegro’s independence, in addition to the Chinese Communist Party’s massive lending to promote the Belt and Road, Russian forces, Serbian forces, the European Union, NATO and the United States have all been competing in Montenegro.
Iskenderov, a Russian scholar on Eastern Europe and the Balkans, said the Republic of Montenegro has been in the midst of a domestic political crisis and turmoil in recent years. The country’s political landscape is split between pro-Western forces and pro-Russian and pro-Serbian forces. The confrontation between these two forces is reflected in the results of the general elections, where both forces have a solid position in the parliament and the presidential power. Much of what is happening in Montenegro should be interpreted and understood in this light.
Russia resents being sidelined by Chinese Communist money
Iskenderov believes that the willingness of some countries in the Balkans to accept Chinese loans is linked to the low level of EU aid there.
After the end of World War II, the former Yugoslavia has historically maintained many economic and trade ties with China for a long time,” Iskenderov said. It can be said that in the case of disappointment with the EU, these former Yugoslav countries are reusing their past experience to resume more cooperation with China.”
Some Serbian analysts believe that the move by the Republic of Montenegro to call on the EU to help repay China’s debt has more propaganda overtones, and it shows that the new Montenegrin government wants to exploit the differences and contradictions between China and the EU on the one hand, and demonstrate a pro-Western stance on the other.
The new Montenegrin government also joined the EU-driven sanctions against Russia in March in response to the Kremlin’s persecution of opposition leader Vladimir Navalny.
The Chinese Communist Party is also active in Montenegro’s neighbor, Serbia. The Republic of Montenegro, Serbia and Russia are part of the same Slavic cultural sphere and are also Orthodox countries. A pro-Kremlin Russian media outlet recently warned that the Chinese Communist Party is squeezing Russia out of Serbia, where traditionally Moscow has had great influence.
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