April 19, 2019
IntelBrief: The EU’s Problematic Approach to China’s Belt and Road Initiative
On March 22 Italy officially signed on to China’s Belt and Road Initiative (BRI), sending a message that the European Union is not united in its approach to Beijing’s grand foreign policy design. Beijing touts BRI as an economic policy aimed at reviving the ancient Silk Road trade route to promote globalization, interconnectedness, and free trade through large-scale infrastructure investments. The 21st Century version of the Silk Road, however, is much larger in scope than its predecessor. To date, around 70 countries across Eurasia, Africa, and Latin America have agreed to be part of BRI, with Italy being the first G7 country to join, signing deals worth 2.5 billion Euros with China. Since Chinese President Xi Jinping first announced BRI in 2013, the project has come under intense scrutiny for lacking transparency, fostering corruption and debt-entrapment, and infringing upon state sovereignty.
The European market is a prime investment destination for China. Initially focused on Western Europe, Beijing has now increasingly turned to Central and Eastern Europe (CEE) under the 16+1 Framework, which is a multilateral framework for dialogue and cooperation between China and 11 EU member states and 5 Balkan countries. These countries need infrastructure development but have limited financing options, and struggle with strict guidelines on transparency required by international lending institutions, which has led to a ‘marriage of convenience,’ mutually attractive to all parties. Completed infrastructure projects financed by China in the 16+1 region amounted to $715 million, with an additional $3 billion for projects currently under construction. BRI initiatives in Europe include the Piraeus port in Greece, the Belgrade-Bar motorway, and the Budapest-Belgrade railway, to name a few.
China’s increasing involvement in key infrastructure projects on the European continent has spurred concerns about the political strings that are inevitably attached –and potential implications for European security. There is growing concern that infrastructure loans under the BRI umbrella are incurring soaring debts for Western Balkan states that are seeking EU membership, including Serbia and Montenegro. If EU states default on their BRI loans, it becomes a question of whether the EU will bear the responsibility to mitigate broader economic fallout. As the recent example of Pakistan’s financial crisis demonstrates, the International Monetary Fund (IMF) explicitly stated that a bail-out would not be an option if Islamabad continued to accept unsustainable loans from China. EU member states’ warming relationships with China have also created political divisions: in 2017, Greece vetoed a joint EU statement criticizing China based on human rights and a year prior, Greece and Hungary refused to sign a joint EU statement criticizing China's growing aggression in the South China Sea. In addition, the U.S. has warned European allies and countries against accepting the Huawei 5G network due to the consequences for security and intelligence sharing.
To date, EU member states have failed to agree on a strategy to manage growing Chinese influence in Eurasia. When BRI was initially launched, the EU adopted a passive approach. Over time, EU countries grew more discerning and apprehensive at the scope of China’s ambitions. At the beginning of 2018, high-level EU officials called for a collective response to BRI and in October 2018, EU foreign affairs chief Federica Mogherini presented a new EU strategy for connecting Europe and Asia—primarily viewed as a counter strategy, even though BRI was never explicitly mentioned. The recent news about Italy, however, underscores the failure of the EU to emphasize the consequences to European security if member states choose to collaborate closely with China. For the EU, questioning the arrangement is counterintuitive in some respects, and highlights the gulf in priorities between economics and security. Accordingly, many European states are in dire need of infrastructure development and a fiscal stimulus. Therefore, instead of purely ‘countering’ BRI in Eurasia, it is important that EU states make a concerted effort to gather and disseminate intelligence across the EU on BRI, China’s growing influence, and its impact on security. The lack of transparency and, by extension, understanding of BRI is currently the biggest hindrance in the EU formulating an effective and coherent strategy.
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