Japan, China and the Western Balkans

On January 17th, Japanese Prime Minister Shinzo Abe wrapped up a five-day trip to northern and southeastern Europe. After his visit to Estonia, Lithuania and Latvia, he went to Bulgaria, Serbia and Romania. His trip to Baltic and Balkan regions fits Tokyo's ten-year efforts to settle as a global economic and political leader and to boost its sphere of influence through its use of soft power and its use of financial level as a powerful diplomatic tool.

In the Balkan part of the trip, some points require attention. Most importantly, but perhaps even more pleasant was Abe's visit to Romania, which would be a boring diplomatic success for both sides, complete with even more boring communiqués if Romanian Prime Minister Mihai Tudose did not resign on the night before Abe's arrival, leaving his Japanese counterpart “behind the hand”. The appeal for Japanese guests and Romanian hosts multiplied with the fact that this was the first visit by a Japanese prime minister to Bucharest -- a historic event for both countries and a symbol of pride for the Romanian government. The fact that Bucharest was the last stop of Abe's trip to the Baltic and Balkan regions helped little after his official meeting with Romanian President Klaus Iohannis was prepared 24 hours ago to avoid a piece of shame.

Abe's visit to Sofia, the Bulgarian capital, was the one who began his Balkan tour. Bulgaria currently has the six-month rotating European Council presidency, and as such it is strategically important for Tokyo's hopes to see Tokyo's comprehensive Economic Partnership Agreement (EPA) between Japan and the EU finally completed in 2017 and is scheduled to take effect by 2019 unjustly ratified by the 27 member states. EPA is a reference point for Tokyo's efforts to further enter the market of close to 600 million Europeans, and compete with Seoul in free trade deals. South Korea signed an MTL with the EU in 2009 that went into effect in 2011 and was ratified by all EU members by 2015. Japan is the second-largest Asian partner for the EU, behind China and in that sense EPA represents an essential economic element in Abe's big plan for the revival of Japan's economy.

Of the six stops Abe made on this trip, his visit to Serbia deserves special attention. Serbia is the only non-EU member state in Abe's last tour and stands separate from others for a number of reasons. First, because, unlike the other five countries, which were organising the first visits by a Japanese prime minister, Serbia was visited earlier, though 30 years ago, when Yugoslavia was still a reality. In that sense, Abe's visit to Belgrade was not like his visit to the other five states, but rather an attempt to revive old ties.

Moreover, the supposed goal of Abe's visit to the five EU states was to seek the EPA's quickest ratification by implementing the agreement. Abe brought a delegation of specially selected Japanese business leaders, who quickly began drafting business plans for future trade infrastructure. However, the Serbian part of Abe's trip was strange. With Serbia a non-EU member state, its involvement could not be related to the EPA, and expressed common concern about the nuclear threat from North Korea was nothing more than an act of symbolic solidarity expected in such situations.

The current motive after Abe's visit to Belgrade had more to do with the close relationship, established over the past five years, between Serbia and China.

China- Serbia

To understand this, we must take a quick look at relations between China and Serbia and the latest developments. Serbia is an important link in the Chinese One trillion dollar initiative “A Belt” (BRI) which was proposed by Chinese President Xi Jinping in 2013. THE BRI envisions a network dominated by China that will reach and connect Asia, Europe, the Middle East and even parts of Africa, America, and Australia into a complex commercial system. This vision, if realised, would allow Beijing to increase and spread its political and economic influence.

As part of the BRI, over the past few years, China has started major investments in Serbia aimed at creating a regional infrastructure that facilitates the achievement of Chinese goods on European markets, especially in Germany. The Chinese predict the use of the Greek port of Piraeus, near the capital of Athens, which is currently controlled and operated by the Chinese company COSCO, with the aim of moving goods through the Balkans and the EU. Given Piraeus's relative proximity to the Suez Canal, compared to, for example, the northern ports of Rotterdam or Hamburg, the Balkan route is presented as a suitable and attractive option for Beijing's plan to expand the depth of the BRI in the heart of the EU. To that end, China is now investing a lot in Serbia's railway systems and highway systems, dropping hundreds of millions of dollars for construction or repair and re-building of bridges and roads many of which still remain in poor condition since NATO bombings 20 years ago or creating new road infrastructure, such as building a $740m highway that will connect Belgrade's capital with the coastal town of Bar in Montenegro. But Beijing's main project is the $3 billion investment project to build a 350-mile rail link between the Hungarian capital Budapest and Belgrade.

For Serbia, Chinese investments even when they come under the obvious conditions attached (for example, China's Exim credit interest depends on the participation of Chinese companies in the construction process) are not only welcome, but also the only low price option Belgrade has. As a non-EU member state, the Serbian state cannot benefit either from EU structural funds or from preferential loans of low interest from the European Bank for Reconstruction and Development (BERZH). China, on the other hand, is very happy to provide its generous financial support and offer loans far below market interest by 20 or 30 years of age and invest in finance, resources and expertise in building regional transport infrastructure in the Western Balkans. In addition to economic support, Beijing is also reaffirming Belgrade and its political support, joining Serbia against The EU and the United States refusing to recognise Kosovo, for example.

Japan's Answer

It is this Chinese attention in the Western Balkans that was the main motive for the Japanese prime minister's recent visit to Serbia. Tokyo is desperate to combat increased Chinese power by opening its bag and expanding its political power in a small Balkan country. Promising to invest in essential energy projects, such as building a desulpment unit for the Nikola Tesla thermal power plant, investing in Serbia's pharmaceutical, agricultural and IT industries or using the expertise of the Japanese Agency for International Co-operation to identify potential areas for economic co-operation, Japan hopes to challenge some of the effects of the recent Chinese Inquisition in the Western Balkans. Tokyo hopes to achieve this by boosting its diplomatic role in the region, and especially by influencing Serbia and other Western Balkan states on its side. In this context, while in Serbia, Abe proposed a “Initiative for Co-operation of the Western Balkans”, part of which envisions Japan assigning a special ambassador to the top of the Western Balkans to the Ministry of Foreign Affairs. Abe also offered to accommodate Serbia with the EU for accelerating the integration process.

However, it is unclear how much Abe will be able to reduce the Chinese encouragement in the Western Balkans, or how much the EU itself will be able to control it. To begin with, Serbia's chances of joining the EU in the short term are less than slim. As in the case of Turkey and other countries waiting in the EU lobby, the Serbian population is gradually becoming disappointed with prospects for EU membership and has been overwhelmed by an increasingly pronounced <x0). For example. More Serbs now believe EU membership will be bad for the country, and only a small number of dreamers believe this will happen by 2025. While full EU membership seems increasingly distant, more visible and increasingly exclusive, investments are already here and are real.

Despite the fact that China and Japan stand on a large amount of funds according to the Balkan regional standards destined for development, the Chinese portfolio will be difficult for Tokyo to compete, not only because of the priority of the first movement Beijing enjoys. Beyond economic issues, China and Serbia also enjoy common political sympathy and mutual support for each other, especially on issues such as the separatist movements of Kosovo and China in Tibet and Xinjiang. During NATO bombings in Serbia in 1999, the Chinese embassy in Belgrade was hit by Western missiles. NATO always said the attack was wrong, but is widely believed to have been revenge against the Chinese for providing information to the Milosevic regime. NATO bombings have not yet been forgotten in Serbia, and memories of the Chinese congregation and support are appreciated. These are emotional ties that are difficult to compare with Tokyo, and it is not politically feasible for Japan to try something like that.

On the other hand, the concentration of the Chinese BRI in Serbia is far from clear, even to specialists who closely follow China's involvement in the region. The Serbian railway infrastructure system may eventually improve, but Chinese goods will continue to arrive in Belgrade by Piraeus. This requires the passage through Macedonia a non-EU state or Bulgaria. None of these countries have seen the attention of Chinese investments compared to that in Serbia. Furthermore, Chinese goods after the proposed route would have to travel from one EU member (Greece) to non-EU member states with unclear pre-accession agreements (Macedonia and Serbia) to enter another EU member (Hungari). It's unclear if these disorderly logistics would be worth the headache.

While details concerning the relevant strategies of China and Japan in the Western Balkans are still unclear, the region is a potential battleground for a number of global actors China, Japan, the EU and potentially Russia and the United States seeking to use their soft power muscles (and perhaps more). The hope is that this race can be useful for the region, but also risks destabilizing the Balkans and plunge it into greater turmoil.

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