China’s deal with Montenegro makes sense if you realize it’s not about money

Montenegro is a tiny Balkan nation across the Adriatic Sea from Italy, nestled between Serbia, Bosnia, Herzegovina, Kosovo, Albania, and Croatia, and with a population roughly the size of Vermont’s. It’s in deep trouble because a past government, using a $1 billion loan from a Chinese state bank, entered into a deal with a Chinese state-owned construction company to build a 270-mile-long highway. Now, with only 25-miles extending from nowhere to nowhere built, the debt is coming due and Montenegro has no money with which to pay it. Montenegro’s troubles are waking Europe to the way China has inveigled poor countries into its debt, giving it ownership interests across Europe.

According to NPR, in Montenegro there’s confusion about how the former government could enter into such a manifestly disastrous agreement:

Montenegro’s government says the first section put it in so much debt that it can no longer afford to build the rest of the highway. “I think we will pay not maybe this generation, but future generations,” says Soc, the former justice minister. “But I don’t think this is a problem from China. It is our bad decision.”

He’s not the only one blaming the country’s previous government for catapulting the country into historic debt with this project, which was signed in 2014 with the China Road and Bridge Corporation, and funded by the Export-Import Bank of China. “We are now [a] victim of the extremely bad decision of the former government,” said an exasperated Montenegrin Deputy Prime Minister Dritan Abazovic to Euronews this spring in an effort to appeal to the EU to come to Montenegro’s rescue; the country aims to be an EU member one day.

A copy of the loan contract reviewed by NPR shows that if Montenegro is not able to repay China’s state-owned Export-Import Bank on time, the bank then has the right to seize land inside Montenegro, as long as it doesn’t belong to the military or is used for diplomatic purposes.

In addition, Montenegro’s former government signed off on allowing a Chinese government court to have the final say on the execution of the contract. Deputy Prime Minister Abazovic told Euronews in May that he finds the terms incredulous. “This is not normal,” he said “This is out of any kind of logic of national interest.”

My guess is that the government functionaries who got Montenegro into this agreement – which created a debt more than twice its total gross domestic product – have secreted away comfortable bank accounts in Switzerland.

Much of the article is taken up with offering and then dismissing theories about why China would want to take on a project when it was obvious that Montenegro would default on the loan. Again, I’m guessing, but it seems that likely that China, like a mafia boss, wanted something Montenegro has and was willing to sacrifice money on a loan it knew would be bad to achieve its real goal. In this case, China is creating footholds in Europe, a conclusion even NPR eventually considers:

But Stefan Vladisavljev, a program coordinator for the think tank the Belgrade Fund for Political Excellence, believes he knows. For years, he has kept track of Chinese-funded projects in his home country of Serbia. He sees broader political goals for Beijing, especially in the case of Montenegro, where, despite its pleas to the EU, Brussels refused to help repay the country’s loan to China.

“This was a good chance for Brussels to gain some ground in the region,” Vladisavljev says. “It was a good chance for Brussels to show its dedication to the region.”

He says by not helping Montenegro, the EU has ceded potential influence to China, which has economic leverage over the country and the region, and whose presence there underlies broader political plans. “The fact that the Western Balkan countries are not part of the European Union gives them the opportunity to create their foreign policies and their national policies outside of the EU framework,” says Vladisavljev. “So it’s easy way in to the European territory. It is the easy way in to establishing a sphere of influence into the immediate neighborhood of the European Union.”

And that’s something China’s been hard at work at in the region for years. Under its Belt and Road Initiative, Beijing has purchased the Greek port of Piraeus, turning it into the second-largest port in the Mediterranean, and it’s also constructing billions of dollars-worth of highways and railways, including a planned high-speed railway connecting Belgrade and Budapest.

Exactly. China doesn’t want money; it wants land –in Africa, Europe, Asia, and Latin America. By exporting an economy-breaking disease and finagling nations to take on debts they can never repay, it’s building an Empire greater than the Romans or British ever did, and it’s doing so without spilling a drop of blood in battle.

IMAGE: Montenegro’s highway to nowhere. YouTube screen grab.

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