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EU and China in BiH: Whose Support Costs More?

Twenty-four years have passed since the war ended, however Bosnia and Herzegovina is still taking its steps toward social and economic stability. Surrounded by quasi-friend countries, it has been trying to pursue any alternative way for reaching its purposes.

In 2016, Bosnia and Herzegovina presented its application for EU membership. From that moment on, the country has started focusing on the criteria under the Stabilisation and Association Agreement (SAA)[1] and turning its current and future laws in line with those prescribed by the EU.[2] The requirements, also known as Copenhagen Criteria, include both political and economic aspects. In addition to these, stabilisation has to be supported through the promotion of regional cooperation with the neighbouring countries. Bilateral disputes in the Western Balkan region often include delineations of borders such as for example the area between Pelješac and Klek with Croatia and the territory along the Lim River with Serbia.[3] Apart from these cases, also diplomatic relations between the countries in the region, need to improve. One of the most crucial examples is the lack of recognition of Kosovo from Bosnia and Herzegovina. As a consequence, no agreement has been signed and this is incompatible with both Serbian and Bosnian ways to access the EU. Only in December, the European Investment Bank signed three funding deals worth EUR 68 million for water supply, storm-water management infrastructure, flood protection and the construction of European transport Corridor Vc.[4] In addition to this, between 2014 and 2020, the EU allocated EUR 552.1 million under IPA II instrument.[5] However, receiving funding is not that easy, as well as stepping forward into the EU still seems hardly feasible.

Apart from the mere accession procedure, the EU already fully operates in the country in a great number of projects financed through various funding instruments but mostly IPA and EIDHR. Great EU focus is on public administration reforms, justice, transport, trade, food security, civil society, cross-border cooperation, democracy and demining.

In this frame, there is another relevant actor who is intervening in Bosnia as a recovering from economic stagnation and, apparently, not at such high costs and commitment. One of the clearest examples of it, are Chinese investments for the Belt and Road Initiative (BRI). Launched in 2013, all Western Balkan countries except Kosovo joined it. Among the most recent funding, Bosnia and Herzegovina signed for a EUR 622 million loan with the Export-Import Bank of China to support the expansion of a coal power plant in Tuzla.[6] Only in 2017, the same power utility named EPBiH chose Chinese companies to replace three aging units at a cost of EUR 905 million.[7] [8]

It is exactly the question of energy that has been creating most clashes regarding the influence of the two actors. As a matter of fact, the EU Energy Community Secretariat is disputing the fact that the loan on the grounds does comply with the EU’s Energy Community Treaty.[9]

The French veto on opening the accession negotiations with North Macedonia and Albania[10] was not of great help: for the Balkan countries, now the road to EU membership looks extremely tortuous. In this scenario, China has the role of an attractive alternative ready and willing to support the region with no particular requirements.[11] This means that Balkan countries can act more freely than when dealing with the EU. At least… on a short term. Cases like these have been seen already. In recent years, Djibouti signed various infrastructure agreements such as port facilities, railways, airports and water pipelines. These later included also the construction of a Chinese military base. Even if Djibouti has expanded its economic ties, China owes an increasingly growing amount of sovereign debt. According to the International Monetary Fund (IMF), Djibouti’s public external debt is estimated to have risen from 50% of GDP in 2016 to 104% by the end of 2018.[12] In Montenegro, China sponsored the construction of a highway that consequently increased the country’s debt to nearly 80% of its GDP. [13] [14]

In this landscape of nets, each party’s interests play a fundamental role. On one side, Bosnia and Herzegovina is trying hard to handle its inner divisions and to favour the development of the country still deeply affected by the past conflicts. As a consequence, it is willing to receive as much support as possible from anybody who could help in pursuing stabilisation and better economic conditions. On the other side, there are two incumbent actors ready to offer their hands. However, their support comes from different intentions. For the EU, Bosnia and Herzegovina represents its closest border with the outside neighbourhood. This implicates a series of consequences: security and stabilisation are the watchwords. Bosnia is the fulcrum for accessing EU borders through the Balkan Route and for this, it needs to be monitored. In addition, in regard to its inner stabilisation, for the EU is fundamental favoring economic and social development. However, the process is not very easy: EU policies and standards represent a long path even for short-term interests. It is exactly in this gap that China could find an open road. By increasingly stepping into the economic market of the region, China can maintain its strategic geographic placement for trade and transportation in Europe.

[1] https://ec.europa.eu/neighbourhood-enlargement/policy/glossary/terms/sap_en

[2] European Commission Staff Working Document, Analytical Report, 29 May 2019, available at: https://ec.europa.eu/neighbourhood-enlargement/sites/near/files/20190529-bosnia-and-herzegovina-analytical-report.pdf

[3] Beata Huszka, The power of perspective: Why EU membership still matters in the Western Balkans, European Council on Foreign Relations, 7 January 2020, available at: https://www.ecfr.eu/publications/summary/the_power_of_perspective_why_eu_membership_still_matters_in_western_balkans

[4] Stefan Radulovikj, Bosnia signs three funding deals worth 68 mln euro with EIB, SeeNews, 18 December 2019, available at: https://seenews.com/news/bosnia-signs-three-funding-deals-worth-68-mln-euro-with-eib-680798

[5] https://ec.europa.eu/neighbourhood-enlargement/instruments/funding-by-country/bosnia-herzegovina_en

[6] China-backed coal plants on EU’s doorstep hide huge carbon costs, Climate Home News, 14 January 2020, available at: https://www.climatechangenews.com/2020/01/14/china-backed-coal-plants-eus-doorstep-hide-huge-carbon-costs/

[7] Bosnia gives green light to controversial Chinese energy loan, RadioFreeEurope, 7 March 2019, available at:  https://www.rferl.org/a/bosnia-gives-green-light-to-controversial-chinese-energy-loan/29809472.html

[8][8] Maja Zuvel, EU official criticizes Bosnia’s backing of Chinese power loan, Thomson Reuters, 13 March 2019, available at: https://www.reuters.com/article/us-bosnia-eu-energy/eu-official-criticizes-bosnias-backing-of-chinese-power-loan-idUSKBN1QU1JD

[9] Annabelle Timsit, China funds more coal plants in Bosnia as residents protest some of the world’s worst air quality, Quartz, 22 January 2020, available at: https://qz.com/1788391/china-funds-coal-plants-in-bosnia-as-residents-protest-air-quality/

[10] https://www.southeusummit.com/europe/france/bosnia-simmers-as-eu-accession-appears-a-distant-dream/

[11] China in the Balkans: Economic investments at what cost?, Dexis, 4 October 2019, available at: https://www.dexisonline.com/insights/china-in-the-balkans-economic-investments-at-what-cost/

[12] China’s Engagement in Djibouti, Congressional Research Service, 4 September 2019, available at: https://fas.org/sgp/crs/row/IF11304.pdf

[13] Lu Hui, Is Montenegro’s highway a debt trap or roat to success?, Xinhua Headlines, 4 October 2018, available at:  http://www.xinhuanet.com/english/2018-10/04/c_137510744.htm

[14] Noah Barkin, Aleksandar Vasovic, Chinese ‘highway to nowhere’ haunts Montenegro, Tompson Reuters,18 July 2018, available at: https://www.reuters.com/article/us-china-silkroad-europe-montenegro-insi/chinese-highway-to-nowhere-haunts-montenegro-idUSKBN1K60QX

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