Montenegro Joins The List Of Countries Where China Has Displaced Russia

The Russian press is increasingly filled with stories of China displacing Russia in countries that were previously considered bastions of Russian influence.[1] This report in the Finance.rambler.ru outlet titled "China Is Pushing Russia Out of Montenegro", shows how China has become the major economic power in Montenegro and is becoming increasingly dominant in neighboring Serbia. The Chinese strategy is to give loans with few questions asked even for projects that are economically unviable or wasteful. Via such loans, China creates economic dependence.

The report follows below:[2]

Chinese Premier Li Keqiang meeting with his Montenegrin counterpart Dusko Markovic (Source: Xinhua.net)

"China has taken away from Russia the title of the main foreign investor in Montenegro. According to the local central bank, the PRC invested more than € 70 billion in the Montenegro’s economy in 2020 fiscal year, although a year ago China was not even among the top 50 foreign investors in the Balkan state. But large infrastructure projects with Chinese participation, in which Podgorica engaged, were marked by scandals and enslaved the Montenegrin economy.

"According to the Central Bank of Montenegro, Chinese investments included funding or purchase of Montenegrin companies, the acquisition of real estate, as well as the [acquisition] of so-called inter-company debt, that is, loans that Montenegrin companies took from Chinese firms. This year, the PRC was mentioned in the Central Bank’s report for the first time, which is quite unexpected, given that it immediately took first place.

"In terms of investments Italy takes the second place, [with the corresponding indicator of] € 43.3 million, and Russia is only on third place (€ 42.5 million). Last year, our country held first place. Switzerland and the United States are in the fourth and fifth positions with € 37.3 million and € 21.5 million, respectively.

"The [Central Bank’s] report does not disclose in what [ventures] precisely did the foreign companies invest in, but other sources name several large infrastructure projects with Chinese participation. And they are all considered to be rather controversial.

"The first major deal between the Montenegrins and the Chinese was the credit purchase of two ships from Beijing for the Montenegrin National Shipping Company. The government was trying to save the dying shipping "giant", and in the midst of an industrial crisis.

“'No one would agree to fund such a short-sighted policy. Besides China, of course,' -says Mladen Grzic, a researcher at the European Institute for Asian Studies. – 'Now the Montenegrin government is covering the loan, and the shipping company continues to be in a dire state.'

"Another expensive and unsuccessful project is the construction of a section of the Bar - Boljare highway, which is part of the road that connects Podgorica and Belgrade. The tender on the highway's construction that was won by the “China Road and Bridge Corporation” (CRBC), was marked by constant delays, revisions and price increases. The initial price of the road, estimated at € 800 thousand, could eventually reach € 1.3 billion. By comparison, Montenegro's total GDP last year was € 4.9 billion."

Construction on the Bar-Boljare Highway (Source: Balkaneu.com)

"Chinese banks are known for asking few questions when issuing substantial loans to foreign countries. As a result, debt burden and inability to pay off loans have become a serious problem for many African countries, especially in the context of the 2020 economic crisis. Apparently, Montenegro will face the same fate: the volume of its external debt has grown since independence in 2006 from 38% of GDP to 80%.

"The Balkan country's previous government, headed by long-term leader Milo Djukanovic, actively took loans. But as a result of the parliamentary elections in late August, a motley opposition coalition came to power in the country. They will still have to repay the debts of the previous government, but, perhaps, the attitude towards Chinese investments will be revised. But the course towards integration with the European Union probably will be continued.

"According to Mladen Gricz: 'The new government’s desire to win much-needed sympathy in the EU and finally resume the integration process could mean less intense economic cooperation with China. Chinese loans are cheap politically speaking, but expensive economically. This negatively affects the integration process.'

"China perceives the Balkan states as a gateway for its goods to the European Union. Therefore, it has recently been paying special attention not only to Montenegro, but also to Serbia. This affects the public opinion of the Serbs. According to a poll conducted in July, most of the country's citizens believe that China is helping them the most. The European Union took the second place, and Russia - only the third. Belgrade, for its part, sees Beijing as a more influential ally than Moscow, so it tries to get closer to the new Chinese friends."