Montenegro has approached the European Union for a U.S. $ 1 billion bailout for paying off Chinese loan for an incomplete highway project
Montenegro has approached the European Union (E.U.) for a U.S. $ 1 billion bailout for paying off Chinese loan for an incomplete highway project that has put at risk the financial capabilities of the Balkan nation.
Montenegro is a country in Southeast Europe. It is located on the Adriatic Sea and is a part of the Balkans, sharing borders with Serbia to the Northeast, Bosnia and Herzegovina to the Northwest, Albania to the Southeast and the Adriatic Sea and Croatia to the Southwest.
The incomplete highway project is being built by China Road and Bridge Corporation (CRBC). CRBC is a subsidiary of Fortune Global 500 company, China Communications Construction Company (CCCC), which focuses on global civil engineering and construction projects such as highways, railways, bridges, ports and tunnels. CRBC is among the largest engineering and construction firms globally and operates from more than 50 branches and offices throughout Asia, Africa, Europe and America.
The incomplete highway project is a larger part of China’s efforts to increase influence in E.U. This is the first time that Montenegro or any other country from the Western Balkans has made this type of request to E.U. to help combat rising influence of China.
Speaking on the occasion, the Finance Minister of Montenegro – Milojko Spajic said,
that Montenegro is small enough and that it should be an easy decision for the EU to help refinance the loan.
In 2014, Montenegro had signed a deal with the EXIM Bank of China to finance 85% of the cost of the road. The first section of 41 km., which is 1/4th of the total length, costs € 20 million per km., making it one of the most expensive highways per km. in the world.
Spajic also said, “For infrastructure we’re currently relying on China… The situation is dramatic from a geopolitical standpoint. We have to connect ourselves closer to our EU allies. We need alignment with the economy.”
The country is seeking help from a number of European organizations which include European Commission, the European Investment Bank and the European Bank for Reconstruction and Development.
While the E.U. has indicated a willingness to help, it is finding it hard to find a proper financial instrument because the project was almost complete. The E.U. wants Montenegro to make some reforms. It also said that the highway project did not match the E.U. standards.
An E.U. official said, “Politically we want to help… But the size of the loan is disproportionate to the size of the economy, so the mechanics are not obvious yet.”
The contract was signed by the previous Montenegro Government led by the Democratic Party of Socialists, which was ousted in August after 30 years in power. Two separate feasibility reports had also termed the initiative as unviable. Before being ousted, the Government also signed a € 54 million contract with a Montenegrin-Chinese consortium for a thermal power plant.
China holds one-quarter of Montenegro’s debt and if Montenegro fails to make the payment, China will have the right to access Montenegrin land as collateral.
China is trying hard to enter E.U. through infrastructure and energy projects. Recently, Hungary went against the E.U.’s guidelines and procured Coronavirus (COVID-19) vaccine independently from China. Besides, China has also donated 30,000 doses of the COVID-19 vaccine to Montenegro and has sold several million to Serbia.
