/ world today news/ At the moment, another episode of Chinese expansion is taking place in the Balkans. Beijing is ready to take the most important sea port in Montenegro for debts, and this is far from the only example of such technology used by the Chinese around the world. Why is China doing this and what global consequences will all this lead to?
China is preparing to annex part of the territory of Montenegro. And to annex it absolutely according to the law. The fact is that in 2014, the then Prime Minister of Montenegro Milo Djukanovic (now he holds the post of President and actually continues to lead the country) took a loan of 1 billion dollars from China to build a section of the highway that was supposed to connect Montenegro with Serbia. To understand the scale of the loan, Montenegro’s entire GDP in 2019 is estimated at $14 billion, and the Chinese loan is equivalent to about half of all budget spending. Therefore, many even then called it a personal PR project of Djukanovic, as well as a money-making tool for his entourage, who hoped to reduce the proceeds of the loan.
Now the Montenegrin authorities are trying to get out of having to pay the Chinese debt. Either refinancing from the Europeans at a lower rate (Chinese debt is 2%, they want less than 1%), or get refinancing. The Chinese still do not bother them – the terms of payment have not been violated, and the terms of refinancing in any case will have to be agreed with the Chinese according to the contract. Why did the Chinese make such a risky investment? Because this highway was needed not only by Montenegrins, but also by Beijing.
Today, the main Chinese-controlled gateway for Chinese exports to the EU is the Greek port of Piraeus. In 2010, the Chinese began to systematically buy up its shares, in 2016 they gained control of it, after which they seriously invested in port facilities. However, the logistics are still not very convenient.
“Chinese goods go to the EU through Macedonia and Serbia. It takes a long time, plus you still have to go through customs on the way. It would be much more convenient for the PRC to import its goods through the Montenegrin port of Bar, from where they will enter Serbia on a high-speed highway built for a Chinese loan, and then to the EU market,” said Oleg Bondarenko, founder and editor-in-chief of the “Balkanist” project.
Yes, the port of Bar, unlike Piraeus, does not belong to the Chinese – but this point was also considered. The fact is that according to the terms of the contract, if Montenegro cannot pay China the debt for the highway (and it was initially clear that it would not be able to), then in this case the creditor represented by the State Bank of China can receive payment in kind in the form of Port Bar. Full possession of China. Well, as a nice bonus, the Chinese get part of Bularika Beach – the only undeveloped large beach (about two kilometers of coastline) in the region.
Of course, points in the contract could theoretically be challenged in court (after all, Milo Djukanovic has a reputation for breaking his obligations for whatever reason), but the Chinese have also insured themselves. According to the terms of the agreement, any challenge to it must take place in a Chinese court, not a European one. Where Djukanovic has no chance. As a result, everything that happened looks like a conspiracy.
The Montenegrin authorities managed to cut some of the Chinese millions. As part of the contract, the Chinese themselves build the highway they need (and, according to local residents, build it conscientiously), and also receive the port of Bar, no less necessary for them, as a fine for non-payment of the loan. A port that would certainly have been more expensive to buy outright, and it’s not a fact that it would have happened at all due to Western opposition.
Yes, theoretically the West could still prevent the port from being taken over by China. The Montenegrin authorities officially appealed to him for help in paying off the PRC debt. “Djukanovic is trying to take advantage of the confrontation between China and Europe, he will ask for money from Europe to keep China out. He believes that he has created a space for maneuvering and can use it successfully, “says Oleg Bondarenko. And the Minister of Finance of Montenegro, Milojko Spajic, has already announced that his country has reached an agreement with three banks (two American and one French). However, in reality, the chance of such an agreement is minimal. First, Europe does not want to help Podgorica. Or more precisely to Djukanovic personally. “They don’t trust him and think he will use the European money for his own purposes. That it would be a gift useless to European interests. The West wants to get rid of Djukanovic,” continues Oleg Bondarenko.
Secondly, do not forget about the terms of the contract – China has all the legal options to block European refinancing. And if the EU believes that this is not the case, then the last point of the question, we remind you, is put by the Chinese court. Chess and Checkmate.
Unfortunately for the West, this is not the only problem. The fact is that every superpower has its favorite tool for subjugating other countries to its will. Some focus on aircraft carriers, others on ideology. The Chinese, on the other hand, focus on money. Either on direct purchases or on credit weapons – the same as they used in Montenegro.
Western experts even conducted a study of this weapon and found that the Chinese approach to loans is very specific. In its loan agreements, the PRC writes special debt service conditions that greatly complicate the ability of third countries to influence these credit relationships, and also impose a number of other obligations on the borrowing country. At the same time, these loans are extremely opaque and, let’s say, provide enough opportunities for the elites of those countries that take Chinese money.
For the most part, the Chinese are not interested in whether the loan will be spent purposefully – for them, the most important thing is to receive benefits from it, and preferably not in money, but in kind. For example, Tajik gold mines or African deposits.
Well, either the ports that the Chinese take for debts (since they will probably take the future Cameroonian port of Kiribi after building it with the money from the loan issued by themselves to Cameroon, which the local authorities will not be able to repay), or they they just redeem it using the traditional method.
So, not only Piraeus and Bar are in China’s sphere of interest. In addition to them, the Chinese own shares in another dozen large ports in Europe – Marseille, Genoa, Rotterdam, Bruges, Valencia, Istanbul and others. In addition, the Chinese control some of the African ports, as well as Pakistan’s Gwadar and Sri Lanka’s Hambantotu – the most important port at a key crossroads of the world’s trade routes.
“The ports are operated by two large Chinese companies – Cosco Shipping Ports and China Merchants Port Holdings. These facilities not only bring tangible profit to the Chinese, but are also important to the implementation of the Belt and Road. They make it possible to ensure continuous operation of the port infrastructure at critical points,” says Alexey Kupriyanov, senior researcher at IMEMO NA RAN. Simply put, it is much safer for Chinese cargo to be unloaded at Chinese ports in the EU and other countries. This means that, at least at this stage, no one can stop the Chinese trade. At the same time, there is essentially no collectively organized resistance to China’s plans. Europe loathes Djukanovic, while the Americans hesitate. Yes, Indians are active, but their activity is still limited. “The Indian military and politicians are nervous about any new Chinese port, suspecting that the PRC wants to use all this infrastructure for military purposes against India in the future. So they are trying to prevent the Chinese from taking control of the ports – either by using political connections, or by proposing and financing alternative projects, or by investing in nearby infrastructure. However, all this applies only to the Indian Ocean region – the Indians do not care what will happen outside it,” says Alexey Kupriyanov.
And while everyone hesitates, China continues to lend to third world countries, increasing its share of its bloated portfolios to 60-70%. And it receives benefits not only in the form of payment in kind or visits from government leaders to request debt restructuring. China gains control over the decision-making process in these countries.
“There is such a phrase -” preventive obedience “. It is often used when talking about relations with the Chinese. This means that when they make different decisions, they try to make sure that they don’t offend China,” says Theresa Fallon, a Brussels-based China expert. In fact, this is a kind of diplomatic anaconda – China does not occupy or coerce anyone, but the fear of losing Chinese investors limits the possibilities of action, stifles free will and shrinks room for maneuver. In this way, they effectively bend to their will those who are dependent on the Chinese financial needle.
Translation: V. Sergeev
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