During talks with his Serbian counterpart Tomislav Nikolic in Beijing on March 30, Chinese President Xi Jinping expressed “hope” that the Belgrade-Budapest railway project would be advanced. Xi never mentioned the European Union’s pending investigation into the planned high-speed train between the capitals of Serbia and Hungary, but it is hard not to detect a tinge of irritation in his words over the EU’s decision to suspend the China-backed initiative temporarily.
The Chinese government is concerned that the EU’s probe could delay or even block the rail line’s upgrade. The new bullet train should be China’s showpiece initiative in Europe under “One Belt, One Road” (OBOR), Xi’s plan to boost connectivity across Eurasia through the construction of new Silk Roads, with the aim of making Western Europe an outlet for the Chinese industrial glut and giving Beijing’s diplomacy more strategic depth.
The new Belgrade-Budapest rail connection is designed to work as a linchpin between OBOR’s land- and sea-based sections. It is in fact a segment of China’s proposed “Land Sea Express Route” to link Hungary, Serbia and Macedonia with the port in Piraeus, Greece, majority-owned by China Cosco Shipping Corporation.
Geopolitics and EU procedures
The European Commission (EC) is probing whether Hungary – an EU member – infringed the Union’s legislation on public tenders for cross-border infrastructure projects by awarding the contract to Beijing. But the problem is geopolitical, and not just about compliance with EU rules and procedures. The EU executive body is wary of China’s efforts to bolster the “16+1” mechanism, a cooperative platform between Beijing and 16 Central and Eastern European (CEE) countries, including 11 EU member states.
Beijing’s calculus is that these Central and Eastern European countries will become key intersections in the OBOR framework and so part of the vast Chinese geography. In this context, the European institutions fear that China could exploit the CEE grouping as a fifth column within the Union to undermine the EU’s common and security policy if this were to collide with Chinese foreign conduct.
Last summer, the European bloc saw evidence of China’s ability to divide the EU countries when its national interest was at play. During the annual EU-China summit, the European bloc failed to elaborate a common position over the South China Sea arbitration ruling against Beijing, and some CEE nations played a key role in undercutting the EU’s internal cohesion in that circumstance.
In recent years, the EU questioned two other projects that could potentially damage its sovereignty and interests. In late 2014, the European bloc deployed its legal arsenal to push the Kremlin into scrapping South Stream, a pipeline project to transport Russian gas from the Black Sea coast to Europe by circumventing Ukraine. EU rules prevent any company – in this case Russia’s gas monopoly Gazprom – from owning both the conduit and the gas being piped through it. The same regulation is behind the EU’s current screening of German-Russian plans to double the Nord Stream pipeline, which brings Russian gas to Germany under the Baltic Sea.
In contrast, last month, after more than two years of investigation, the EC announced that Hungary had not violated the EU’s tendering procedures and state aid rules in assigning a US$13.3 billion contract to Russian state-owned energy company Rosatom to build a new nuclear power plant.
Coming to terms
The EU’s clearing of Rosatom’s investment in the Hungarian nuclear market portends well for China.
Despite the EU’s steps to counter the growth of China’s influence on Europe’s eastern flank, Chinese investment numbers in this region are still limited. After the creation of the $40 billion Silk Road Fund in December 2014, in fact, Chinese investors pumped $3.79 billion into CEE countries that are also members of the EU. In the same period, China channelled $12 billion worth of investment into Germany alone.
The EU has an interest in improving connectivity within its borders and basically cannot but welcome Chinese capital for that purpose. What the Union cannot accept is that Beijing establishes preferential relations with some EU members to develop transnational initiatives in the European continent.
The EU is a hesitant foreign-policy player in general, but Xi and his comrades are finding out that it may become a tough interlocutor when it comes to conformity with its internal rules. The bloc’s probe into the Belgrade-Budapest railway just serves as a reminder to the Chinese leaders that the road to building OBOR’s offshoots in Europe must inevitably pass through Brussels.