Montenegro could fall prey to Chinese debt

The construction of the priority section of the Bar-Boljare highway, in a length of 41 kilometers, from Smokovac (Podgorica) to Matesevo ​​(Kolasin) is the largest infrastructure project in the history of Montenegro. The section should be opened for traffic in January next year. The construction started in 2015 by the Chinese company CRBC. The original deadline for completion of the works was 2019, but it was postponed several times. The agreed price between Montenegro and the Chinese company for the construction of the priority section was 809 million euros, but due to the subsequent costs for access roads and other infrastructure, the price of the highway has been increased by about 90 million, not counting the interest.

A loan from the Chinese Exim Bank is taken for 20 years, with a six-year grace period and an interest rate of 2%. At that time, according to the then Minister of Transport Ivan Brajovic, that was the most favorable offer in the market. However, the problem with that loan is that it was taken in US dollars and without a mechanism for protection against currency risk.

What worries ans is a concern for the EU and analysts, and which is provided by the agreement, is that Montenegro could fall into Chinese debt slavery, and even lose some of its valuable companies or territories, if it could not repay the debt on due time. It is speculated that the Chinese have “their eye” on the Port of Bar. Actually, the Government claims there is no fear that something like that could happen, and the first installment of the loan of around 29 million euros was paid by the Government in July this year. The next installment is due at the beginning of next year (2022).

Former Minister of Transport Ivan Brajovic, who signed the agreement with the Chinese, said that “no seizure of territory, economic entities and other malicious fabrications can be considered, and that the Constitution of Montenegro also prohibits that.”

However, there are fears of greater Chinese influence on Montenegro, as it could be seen by the fact that in March this year, Deputy Prime Minister of Montenegro Dritan Abazovic, called on EU MEPs in Brussels for help, stating that China is exerting influence through the loan for the highway section.

“China and Russia, regarding their influence, they are a big problem. We have a loan (with China) in the amount of one billion euros. Please help us return that money, to exchange that loan for a loan with a European bank, to conclude cooperation with a European financial institution and to end Chinese influence,” Abazovic said in Brussels.

The EU first said that “the European Union is ready to help Montenegro find a solution”, and then that the EU will not help Montenegro repay the loan it took from the Chinese bank for the construction of the highway. “We work a lot with Montenegro and other partners in the region to help them on their way to comply with EU standards, reforms and all other things, we continue to stand by them, but do not repay loans taken from third parties,” said European Commission spokesman, Peter Stano.

However, the EU said that it would “continue to support Montenegro on the path to EU membership and in that context cooperate with the state in finding financial solutions for its investment projects and ensure the sustainability of its public debt.”

Official Washington is certainly interested in what is happening in Montenegro, which is a member of NATO.

Deputy Assistant Secretary of State for European and Eurasian, Affairs Matthew Palmer, told the Voice of America that “the United States is always open to discussing the specific challenges facing Montenegro and that it is important not only for Montenegro but also for other countries in the region, to seriously consider all obligations arising from agreements with other governments and states”.

“China is known for predatory loans, and it really took advantage of the other side in the agreements concluded by Chinese companies. “Therefore, it is the obligation of the countries in the Western Balkans to be very careful when it comes to agreements with countries that are known for that negative practice, including not only China, but also Russia,” Palmer said.

Chinese Ambassador, Liu Yin, claims that “China has no geopolitical ambitions in Montenegro or the Western Balkans, nor does it want to compete with the EU in gaining political influence.”

Analysts, however, point out that China wants to strengthen its position in Montenegro through investments. For now, China’s investments in Montenegro are not as large as in some countries in the region, where they own or concessionaire mines and ironworks. China is a large lender, contractor and exporter in Montenegro. Montenegro has also agreed with China on the delivery of 150,000 doses of Sinofarm vaccine against COVID 19. The Chinese in Montenegro have participated in the Mozura Wind Farm and the Pljevlja Thermal Power Plant Environmental Reconstruction Project, they own 179 companies, most of which sell clothes wholesale and retail. According to Monstat (Bureau of Statistics), Montenegro imported about 222 million euros’ worth of goods from China last year, or 10% of total imports, while it has exported goods at a total of only 17.4 million euros.

The Geopost