Montenegro asks EU for help with billion dollar Chinese highway loan

Montenegro asked for EU help to repay $ 1 billion Chinese loan incomplete road project which put the finances of the small nation of the Western Balkans at risk.

The saga of the incomplete road project, which is being built by the China Road and Bridge Corporation, is part of a larger geopolitical battle for influence on the EU’s periphery. How Brussels responds to Podgorica’s demand – and whether it will bail out the country from a project long deemed unsustainable – will help shape the bloc’s relations with the region.

“Montenegro is small enough that it is an easy decision” for the EU to help refinance the loan, said Milojko Spajic, Montenegro’s finance minister, in an interview with the Financial Times. “It’s a small but easy win for them. It is a fruit within reach, ”he added.

Stefan Vladisavljev, foreign policy analyst for the Belgrade Fund for Political Excellence, a think tank, said: “This is the first time that Montenegro or any other country in the Western Balkans has done this kind of outreach in Brussels. to combat the growing influence of China. .

“We haven’t heard that anyone has asked Brussels so openly to fight this together.”

Montenegro raised eyebrows in 2014 when it signed a deal with Chinese bank ExIm to finance 85% of the cost of a road with a dollar-denominated loan worth nearly $ 1 billion. The first 41 km stretch, or a quarter of the total length, costs 20 million euros per km, making it one of the most expensive highways per km in the world, Spajic said.

“For infrastructure, we are currently relying on China. . . The situation is dire from a geopolitical point of view, ”he said, adding that its important tourism industry relies on visitors from third countries like Russia. “We need to connect more closely with our EU allies. We need to align with the economy. “

Montenegro, which became an independent country when it separated from Serbia in 2006, joined NATO in 2017, despite strong objections from Moscow. Russia has always been a big investor in Montenegro, which hopes to get the green light to join the EU by 2024.

Spajic said the government would seek financial assistance from a range of Western organizations, including the European Commission, the European Investment Bank and the European Bank for Reconstruction and Development.

The EU said it was ready to help, but a Commission official said it would be difficult to find the appropriate financial instruments, a task made more difficult because the project was nearing completion.

“Politically, we want to help. . . But the size of the loan is disproportionate to the size of the economy, so the mechanisms are not yet clear, ”the official said. Montenegro is also expected to embark on tax reforms, the official added, noting that the highway project did not meet EU standards.

Beijing has made regular forays into the Balkans through infrastructure and energy projects, and more recently itsvaccine diplomacy”Driving in the wake of the Covid-19 pandemic. China donated 30,000 doses of Sinopharm vaccine to Montenegro and sold several million to Serbia.

“China is on the verge of gaining real leverage over policy choices, political attitudes and rhetoric in parts of the Western Balkans,” the European Council on Foreign Relations said in a report in February.

The contract to build the highway was signed by the previous Montenegrin government led by the Democratic Socialist Party, which was ousted in August after 30 years in power.

His decision came under close scrutiny as two separate feasibility studies, in 2006 and 2012, concluded that the highway was economically unsustainable. The government also signed a € 54 million contract with a Montenegrin-Chinese consortium for a thermal power plant just before she was kicked out of office.

China holds a quarter of Montenegro’s debt and, despite massive delays in building the highway, the first repayment is due in July. If Montenegro were to default, the terms of the contract gave China the right to access Montenegrin lands as collateral.

A new Montenegrin government, a coalition of forces opposed to the thin-majority DPS, took the reins in December. It faces a host of challenges, including the fact that the tourism-dependent economy collapsed by 15% last year, according to the IMF.

Spajic said Podgorica is in talks with Beijing over another outstanding debt worth € 127 million.

Observers said Montenegro’s advocacy was an opportunity for Brussels. “The EU should step in,” said Tena Prelec, a researcher at the University of Oxford who studies the region. “Montenegro is in the backyard of the EU: it would, finally, be a concrete way to show that the EU is indeed an actor, a real geostrategic actor.”

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