On July 13, Prime Minister Dritan Abazovic opened the first section of the highway, seven years after the Chinese-financed project started, and drove up Montenegro’s public debt to 90.85 per cent of GDP. Montenegro’s Ministry of Finance said on Wednesday that it is negotiating with European banks on financing the second phase of the Bar-Boljare highway. It is dealing with a rising global power that is using economic statecraft to expand its global clout across the Eurasian supercontinent, including at its European edge.The first phase of the Montenegrin Bar-Boljare highway. When it comes to China, the EU is not dealing with an actor who plays according to the technocratic rules set down by the Brussels bureaucracy. However, the case of Montenegro is not one of commercial contract law but of geopolitics. And officials in Brussels have suggested that even if they did attempt to directly restructure the debt, the Chinese would somehow seek to block the move. There is, of course, a sound business logic in the EU’s reluctance to assist with debt involving third parties. Montenegro is, after all, a Nato member state. That loyalty would mean more work for Chinese state-owned companies and voting at international institutions in China’s favour. The second strategy is to offer Montenegro debt restructuring but in exchange China will seek political loyalty from Montenegro. China already owns Piraeus Port in Greece - Europe’s seventh largest harbour. The same could happen to Bar port in Montenegro. That is how in 2017 China got a 99-year lease on a strategic Indian Ocean port in Sri Lanka. The first is so-called ‘debt-trap diplomacy’ where China directly acquires critical infrastructure in a country that is unable to service its debt.
There are two ways China can now proceed. Last year’s elections brought in a new government, ending the three-decades of illiberal rule by Đukanović’s party. With holidaymakers barred from visiting the Adriatic country, the economy has shrunk by 15 per cent of GDP. Montenegro is an economy that is deeply dependent on tourism. But like many projects, the pandemic has had unforeseeable consequences. Officials had always expected some problems but calculated that the subsequent economic growth would absorb much of the debt. That Brussels has gone to German, French and Italian development banks in the hope that they can bail out the country with indirect financial aid. Montenegrin society had been shocked by Brussels’s brusque treatment. Meanwhile, the EU has until recently refused to assist in restructuring the debt - just as the country goes through the process of accession to the bloc. Ukraine’s next move: can Putin be outsmarted? Unesco too has criticised the project for the environmental effect on the protected Tara River. Work that wasn’t carried out by Chinese builders was allegedly sub-contracted out to those with ties to president Milo Đukanović. Now the inevitable corruption allegations have weakened the projects already brittle foundations. Thanks to the inhospitable terrain, engineers planned to build a total of 40 bridges and 90 tunnels. Montenegro is struggling to repay a £860 million Chinese loanĬonstruction was a nightmare from the start. Instead, the Chinese Exim Bank provided a loan, while the state-owned China Road and Bridge Corp was brought in as a contractor. But Western financial institutions were unwilling to support the project, unconvinced of its fiscal viability. Montenegrin roads are notorious for their dilapidated condition and frequent fatalities. It was hoped that the motorway would prove a vital regional trade link. Now the country’s debt has inflated to 103 per cent of GDP, with Beijing owning nearly a fifth of its total loan book. Montenegro is struggling to repay a £860 million Chinese loan for the highway’s construction, built to connect the port of Bar with neighbouring Serbia. The Socialist Republic of Yugoslavia has faded but the communists are back.
The project may bear a symbol of the young post-communist state but those living in the village beneath know who’s really behind the motorway. Hung on one of the vast grey pillars is the country’s distinctive crimson banner, a golden two-headed eagle at its centre. Arching out across a quiet Balkan valley, Montenegro’s first motorway cuts across the rocky scrubland with unnatural precision: a modernist stroke of concrete that gleams against the stony outcrops of the Dinaric Alps.
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