17+1: China’s Ill-fated Venture into Eastern Europe
The 17 Eastern European countries included in the 17+1 agreements (Created using https://mapchart.net/)
The countries of Eastern Europe have all faced a unique historical trend: since antiquity, they have been surrounded by strong neighboring powers that periodically attempt to use their strength in numbers and resources to exert their influence. Despite this, the area has remained as a distinct regional entity separate from Central, Southern, and Northern Europe, though it lies at the strategic crossroads of them all.
In recent decades, the two main powers vying for influence over this area have been Russia and the Western bloc, composed of the United States and Western Europe. Both powers see the region as a vanguard and a bulwark against the other. While the West and Russia remain in a stalemate attempting to secure geopolitical control, a third force has tried to enter the scene: China. China presents itself as an alternative sponsor for Eastern European countries, promising lucrative infrastructural investments without expressly threatening territorial encroachment.
Building (In)roads to Regional Influence
China decided to make inroads in Eastern Europe for the same reason it invests in Africa and Latin America: to funnel money into stagnant economies with the goal of creating new trading partners and expanding its sphere of influence. Chinese venture companies strategically invest in local infrastructure projects often leading to partial ownership or foreign indebtedness. The Hambantota port in Sri Lanka was financed by loans from a Chinese venture company, but the country ultimately defaulted on payments. In return for $1.1 billion in relief, the port was leased to the company for 99 years amidst foreign outrage. Vice President Mike Pence accused China of “debt diplomacy” to expand its influence. The Kenyan Mombasa-Nairobi railroad, planned to connect the country’s main port with its capital, was funded by $4.7 billion in Chinese loans, and it has yet to turn a profit. An NPR report speculates that it too may be a debt trap waiting to close.
The organization known as the Cooperation between China and Central and Eastern European Countries (henceforth referred to by its informal name 17+1 after the number of members involved), is an attempt to create a bustling market for Chinese goods and investments in Europe. On paper, this seems to be a viable strategy. While the U.S. government may balk at the idea of investing in impoverished, authoritarian countries, China has no such qualms, as demonstrated by their economic ventures in Venezuela and Central Asia.
Hungary and Serbia, both routinely criticized for their authoritarian governments, were the first sites of 17+1 investment. At the 2013 Bucharest summit, plans were announced for a high-speed cargo railway to connect the capital cities of Budapest and Belgrade. 85 percent of the project would be funded by Chinese loans, and a construction contract worth $2.1 billion was awarded to CRE Consortium, a company run by a close ally of Hungarian Prime Minister Viktor Orbán. Though high-speed rail is always a desirable prospect for trade and infrastructure, Belgrade is not the final intended destination— that would be the Greek port of Piraeus.
The port of Piraeus once linked the ancient city-state of Athens to the Mediterranean world. In modern times, it has transformed into the largest port in Greece, the busiest port in the Eastern Mediterranean, the second largest passenger port in the world, and the first Chinese acquisition of a European port. The Chinese state-owned company COSCO made plans for a €600 million investment. Chinese President Xi Jinping explained it as an effort to “strengthen Piraeus’ transshipment role and further boost the throughput capacity of China’s fast sea-land link with Europe.” Once the high-speed rail line was expanded into Greece, the port would provide a link for Chinese goods to directly enter the beating heart of the European Union. The future looked bright for 17+1.
Loss of Faith
In 2019, Chinese investment in all of Europe dropped from €18 billion the previous year to €12 billion — an amount comparable to 2013 levels. Some have speculated this was due to heightened restrictions for foreign investments levied by the Chinese government, and growing international outrage about China’s human rights abuses.
But of the money that still went to the continent in that year, most was not being directed to Eastern Europe; Northern Europe received 53 percent of investment alone. This was followed by a respectable 34 percent invested solely in the U.K., Germany, or France (the “Big Three”). This didn’t leave much room for expansion of the 17+1.
It has been approximately eight years since the initial announcement, yet the Budapest-Belgrade high-speed line is still not operational — construction has not even started on the section leading to Piraeus. Orbán, who once proclaimed, “If the European Union cannot provide financial support, we will turn to China,” is surely disappointed in the fact that less than $1 billion worth of Chinese investment has entered his country since 2012, compared to the €6.2 billion the EU spent in Hungary in 2018 alone, plus the €1 billion coronavirus aid package recently approved by the European Commission.
His sentiment is shared by Czech President Miloš Zeman, who once stated that he hoped his country could be China’s “gateway to Europe.” Later, he went so far as to threaten to boycott the 2020 17+1 summit, spurned by a lack of interest on the part of Chinese investors.
17+1 is ambitious, to say the least. It appears to be mutually beneficial cooperation on paper, providing the relatively underdeveloped Eastern European region an alternative trading partner besides Russia and the EU. In return, China gains a new potential consumer base. However, it seems as if Chinese investors are not yet convinced of the viability of financing projects in a region notorious for oligarchs, strongmen, and corruption. As a result, the Europeans of 17+1 feel betrayed and continue to yearn for foreign investment. They do not have to look for long: many countries are willing to invest in them to gain their favor.