In recent years, Montenegro has been at the centre of numerous political and academic debates about the perils of cooperation with China. Analysts, commentators, the expanding community of China pundits, MEPs, and other various types of politicians have sat in unanimous judgement that the country has developed an untenable relationship with China. Since its independence in 2006 Montenegro has sought to find ways to ensure its economic development and status as an independent state. The imperatives of opening up and establishing political and economic international links were obvious for the personalistic regime of Milo Djukanović. The temptation to instrumentalise this political system in bilateral relations with Beijing clearly proved too great and Montenegro found itself in a state of renewed dependence of its own making. What might be described as ‘conditionality with Chinese characteristics’ materialised as Podgorica became overburdened with obligations to Chinese lenders. There were other important political lessons to be learned in the partial overlap between the country’s accession to NATO, its ongoing EU membership negotiations, and the country’s slide into a deeply asymmetrical relationship with China.
The largest China-related infrastructure project in Montenegro is the expensive first section of the Bar-Boljare motorway. But there are many others. Chinese firms are participating in upgrading the country’s railway network and they are also involved in the energy sector. Dongfang Electric Corporation is carrying out the “ecological reconstruction” of Pljevlja coal-based thermal power plant, which it should complete by 2023. Since 2010, Montenegro has purchased numerous Chinese bulk carrier merchant ships to serve its maritime commercial and transport needs. Meanwhile, China has shown a persistent, decade-long, interest in the country’s port infrastructure, inserting clauses in its motorway loan deal which could allow it to seize parts of the port of Bar should it default on its debt repayment obligations. Furthermore, Chinese entities and individuals have slowly expanded their presence in the real estate market.
Media attitudes towards Beijing are generally positive, although outlets increasingly scrutinise the terms of Chinese engagement in infrastructure projects and cases of violation of various sets of standards during the construction of the Bar-Boljare motorway. Deepening ties are particularly notable in the sphere of education and research, with the University of Donja Gorica gradually becoming a hub of Montenegrin-Chinese cooperation with its numerous research projects, exchange visits, and joint degree programmes. The delivery of covid-19 vaccines by China has also been extensive and high-profile.
Montenegro’s problematic approach to structuring relations with China is increasingly highlighted as a textbook example of how not to engage with the superpower. The country has already had to go to Western organisations and banks to avert a default as the country’s new government indicated a more cautious and careful approach. Western politicians of all stripes have used the case of Montenegro to highlight the perils of the continued overall geopolitical impasse in the region. The EU’s new Economic and Investment Plan for the Western Balkans is a novel but clearly financially insufficient response to China’s inroads and is unlikely to incentivise countries to fully refrain from riskier partnerships with external states. Moreover, there is a certain momentum in relations with China, which means they are likely to continue to grow. But the emerging situation is posing a challenge to Beijing as well. Many of its tools of engagement have been exposed, highlighted, and severely criticised due to events in Montenegro. Its ability to work in a non-autocratic political setting with the change of Montenegro’s government in 2020 will be tested. Operating in a context of rising publicity, intense scrutiny, and growing discontent is bound to be a further test for them. Meanwhile, the West will need to prove that its policy attention span is longer than a pending debt crisis.
Economy & business
Investment
China is the world’s largest exporter of goods and the second largest economy in terms of GDP. In contrast, Montenegro is one of world’s smallest exporters of goods and 151st largest economy in terms of nominal GDP. On one side, there is a country with 1.44 billion people, on the other, a small European republic with a population just shy of 630,000 people.
Amid other forms of interaction, Montenegro and China cooperate via the Belt and Road Initiative (BRI). Economic ties with China have intensified since 2014 mainly through the Bar-Boljare highway construction project, which is China’s largest current investment project in the country. Construction on the Smokovac-Matesevo section began in May 2015 and was supposed to finish in May 2019. The latest deadline for completion of this project is the end of May 2022. Funding for this project was secured through a loan from the Chinese EXIM Bank worth around €690 million at the time. Today, the value of this loan is around €800 million. The main contractor for the project is the China Road and Bridge Corporation (CRBC), which has received tax relief from Montenegro as part of its involvement. This project is part of the BRI, but it is hard to predict its future because there are still two sections to be completed for it to become fully functional. However, one thing is almost certain – the project will likely not be completed by the China Road and Bridge Corporation, neither will the funds for the remaining two sections be provided through loans from EXIM Bank or other Chinese entities. This is because Montenegro has made a hedging agreement with an unnamed French bank and two unnamed American banks to reduce the interest rate on the EXIM bank loan from 2% to 0.8%.
A company called Dongfang Electric International Corporation (DEG) was expected to implement a project to ecologically reconstruct the thermal power plant in Pljevlja. Reconstruction has been halted for now, due to the complex political situation in Montenegro during the last year and the change in the executive branch of power after three decades. DEG is part of the same consortium as a company owned by Blažo Djukanović, the son of the Montenegrin president Milo Djukanović. China Civil Engineering Construction Corporation (CCECC) Montenegro is also linked to the reconstruction of the Montenegrin railway system.
Trade
| Year | Import from China in thousands of euros |
|---|---|
| 2016 | 185,182 |
| 2017 | 221,419 |
| 2018 | 256,624 |
| 2019 | 221,954 |
| 2020 | 217,999 |
| Goods classified according to SITC | Value of import in euros |
|---|---|
| 03: Fish (not marine mammals), crustaceans, molluscs and aquatic invertebrates, and preparations thereof | 290.818 |
| 04: Cereals and cereal preparations | 165.773 |
| 05: Vegetables and fruit | 562.932 |
| 06: Sugars, sugar preparations, and honey | 40.596 |
| 07: Coffee, tea, cocoa, spices, and manufactures thereof | 357.867 |
| 08: Feeding stuff for animals (not including unmilled cereals) | 33.182 |
| 09: Miscellaneous edible products and preparations | 221.945 |
| 11: Beverages | 2.656 |
| 12: Tobacco and tobacco manufactures | 362.077 |
| 22: Oil-seeds and oleaginous fruits | 203.777 |
| 23: Crude rubber (including synthetic and reclaimed) | 8.084 |
| 24: Cork and wood | 96.44 |
| 26: Textile fibres (other than wool tops and other combed wool) and their wastes (not manufactured into yarn or fabric) | 19.642 |
| 27: Crude fertilisers, other than those of Division 56, and crude minerals (excluding coal, petroleum, and precious stones) | 5.903 |
| 28: Metalliferous ores and metal scrap | 37 |
| 29: Crude animal and vegetable materials, not elsewhere specified | 69.331 |
| 32: Coal, coke and briquettes | 516 |
| 33: Petroleum, petroleum products and related materials | 98.796 |
| 34: Gas, natural and manufactured | 3.799 |
| 42: Fixed vegetable fats and oils, crude, refined or fractionated | 2.472 |
| 51: Organic chemicals | 233.823 |
| 52: Inorganic chemicals | 668.097 |
| 53: Dyeing, tanning and colouring materials | 315.083 |
| 54: Medicinal and pharmaceutical products | 1,768,817 |
| 55: Essential oils and resinoids and perfume materials; toilet, polishing, and cleansing preparations | 1,038,027 |
| 56: Fertilisers (other than those of group 272) | 283 |
| 57: Plastics in primary forms | 108.866 |
| 58: Plastics in non-primary forms | 913.667 |
| 59: Chemical materials and products, not elsewhere specified | 1,434,154 |
| 61: Leather, leather manufactures, not elsewhere specified, and dressed furskins | 78.81 |
| 62: Rubber manufactures, not elsewhere specified | 4,748,144 |
| 63: Cork and wood manufactures (excluding furniture) | 1,301,789 |
| 64: Paper, paperboard, and articles of paper pulp, of paper, or of paperboard | 1,308,843 |
| 65: Textile yarn, fabrics, made-up articles, not elsewhere specified, and related products | 8,141,380 |
| 66: Non-metallic mineral manufactures, not elsewhere specified | 4,736,505 |
| 67: Iron and steel | 2,749,840 |
| 68: Non-ferrous metals | 480.144 |
| 69: Manufactures of metals, not elsewhere specified | 8,755,789 |
| 71: Power-generating machinery and equipment | 1,055,242 |
| 72: Machinery specialised for particular industries | 4,184,297 |
| 73: Metalworking machinery | 384.929 |
| 74: General industrial machinery and equipment, not elsewhere specified, and machine parts, not elsewhere specified | 14,370,903 |
| 75: Office machines and automatic data-processing machines | 15,900,366 |
| 76: Telecommunications and sound-recording and reproducing apparatus and equipment | 43,764,258 |
| 77: Electrical machinery, apparatus and appliances, not elsewhere specified, and electrical parts thereof (including non-electrical counterparts, not elsewhere specified, of electrical household-type equipment) | 24,552,757 |
| 78: Road vehicles (including air-cushion vehicles) | 4,396,569 |
| 79: Other transport equipment | 200.371 |
| 81: Prefabricated buildings; sanitary, plumbing, heating and lighting fixtures and fittings, not elsewhere specified | 7,025,461 |
| 82: Furniture and parts thereof; bedding, mattresses, mattress supports, cushions and similar stuffed furnishings | 5,917,741 |
| 83: Travel goods, handbags, and similar containers | 3,225,485 |
| 84: Articles of apparel and clothing accessories | 19,518,801 |
| 85: Footwear | 8,849,091 |
| 87: Professional, scientific, and controlling instruments and apparatus, not elsewhere specified | 5,091,985 |
| 88: Photographic apparatus, equipment and supplies and optical goods, not elsewhere specified; watches and clocks | 2,850,207 |
| 89: Miscellaneous manufactured articles, not elsewhere specified | 15,374,389 |
| 99: Unknown | 8.215 |
| Total: | 217,999,771 |
| Goods classified according to SITC | Value of export in euros |
|---|---|
| 11: Beverages | 1,206,016 |
| 12: Tobacco and tobacco manufactures | 20 |
| 24: Cork and wood | 15.072 |
| 27: Crude fertilisers, other than those of Division 56, and crude minerals (excluding coal, petroleum, and precious stones) | 25 |
| 28: Metalliferous ores and metal scrap | 19,665,578 |
| 29: Crude animal and vegetable materials, not elsewhere specified | 30 |
| 63: Cork and wood manufactures (excluding furniture) | 10 |
| 64: Paper, paperboard and articles of paper pulp, of paper or of paperboard | 22 |
| 65: Textile yarn, fabrics, made-up articles, not elsewhere specified, and related products | 382 |
| 66: Non-metallic mineral manufactures, not elsewhere specified | 36.109 |
| 68: Non-ferrous metals | 1 |
| 69: Manufactures of metals, not elsewhere specified | 13 |
| 76: Telecommunications and sound-recording and reproducing apparatus and equipment | 82 |
| 77: Electrical machinery, apparatus and appliances, not elsewhere specified, and electrical parts thereof (including non-electrical counterparts, not elsewhere specified, of electrical household-type equipment) | 3.195 |
| 83: Travel goods, handbags, and similar containers | 6.695 |
| 84: Articles of apparel and clothing accessories | 30.923 |
| 85: Footwear | 5.24 |
| 87: Professional, scientific, and controlling instruments and apparatus, not elsewhere specified | 1,152,676 |
| 89: Miscellaneous manufactured articles, not elsewhere specified | 14.263 |
| Total: | 22,136,352 |
The vast majority (88.8%) of exports to China from Montenegro are metalliferous ores and metal scrap, consisting mainly of aluminium ore. A further 5.5% are beverages and around 5.2% are professional, scientific and controlling instruments. Total Montenegrin exports in 2020 were almost €366 million, which means that exports to China make up 6% of Montenegro’s total exports.
China was Montenegro’s second biggest trade partner when it comes to imports in 2020, surpassing Germany by around €13 million. Total imports in 2020 came to €2,103 billion, which means that 10% of the country’s imported goods came from China. One-fifth of those goods are telecommunications and sound-recording and reproducing apparatus and equipment (€43 million). Electrical machinery, apparatus and appliances and electrical parts (including non-electrical counterparts of electrical household-type equipment) account for 10% of all imported goods from China. Other significant categories include general industrial machinery and equipment and machine parts, office machines, and automatic data-processing machines, which account for around 7% each. Articles of apparel and clothing accessories make up 8.7% of total imports from China.
As noted, the Montenegrin government borrowed $944 million from Chinese EXIM Bank in 2014. The grace period for this loan was six years, expiring in 2021 and the repayment period for the loan was set to 20 years (14 years remaining), with an interest rate of 2%. In 2021, the new Montenegrin government negotiated changes to the arrangement, so now the interest rate is 0.88% in euros instead of 2% in dollars. The first repayment instalment of €27.79 million was paid in July 2021.
Loans from Chinese Banks and Entities
Montenegro borrowed almost $1 billion from China’s EXIM Bank and, later on, it was announced that the Chinese firm CRBC will be the main contractor in the Montenegrin “Project of the Century” – the Bar-Boljare highway. The loan represented almost a quarter of Montenegrin GDP. This means that it has a significant impact on the country’s public finance system and could potentially lead to long-term economic and financial instability.
Interestingly, foreign investments from China between 2006 and 2019 amounted to only around €10 million, with a complete absence of investments during 2018 and 2019 and just over €600,000 in 2017. However, in 2020, China was the second largest foreign investor in Montenegro, behind Russia, ploughing €71.2 million into the country. Out of those €71.2 million, €70 million are “intercompany debts” – loans between companies connected by common ownership.
In 2019, the Montenegrin government started implementing a special investment and development programme of economic significance, the so-called “economic citizenship programme”. This programme allows foreign investors to obtain Montenegrin citizenship under special conditions. One of these conditions involves investing at least €450,000 in projects in the capital, Podgorica or in the southern region of Montenegro. Citizenship can also be obtained by investing €250,000 or more in projects in the northern part of Montenegro. According to data from the Ministry of Internal Affairs, 143 Chinese citizens have been awarded Montenegrin citizenship under this scheme since 2019.
Main Local Companies / Businesspeople with Economic Ties to China
According to the Central Register of Business Entities of Montenegro, there are 179 entities owned by Chinese citizens. These mostly deal in clothes and footwear.
Politics
Cooperation of China with political parties, agreements, visits, exchanges.
Since the beginning of Chinese-Montenegrin diplomatic relations in 2006, the two countries have signed a total of 17 cooperation agreements and memorandums of understanding. Areas of formalised cooperation include diplomacy, culture, education, infrastructure, health, agriculture, and anti- corruption activity. In 2017, the two countries signed a memorandum of cooperation on the BRI at the initiative’s first forum in Beijing. The Montenegrin president participated in the BRI summit held in February 2021. Local government in Podgorica also participated in a local leaders’ summit hosted by the Chinese province of Laoning.
Even though China is an emerging global power, if not already an established one, its political influence in Montenegro remains limited for now. This is due to several factors, including the distance between the countries. Montenegro is also not a key geopolitical player in the region and has a small economy. Further, the country’s voters and politicians also naturally lean towards the European Union, and Montenegro is a NATO member.
The Montenegrin economy is under-developed, and its productivity is one of the lowest in the world. Having Chinese influence primarily related to the construction of a cost-ineffective, half-finished, seven-year in the making 41-kilometre section of the Bar-Boljare highway between Smokovac and Matesevo, without any connections to European road infrastructure, paints a picture of an asymmetric relationship. The controversial highway is also seen as “the last nail in the coffin” for the Montenegrin economy under the regime of the Democratic Party of Socialists and their 30-year rule. The newly elected government was forced to renegotiate the repayment conditions with EXIM Bank to address the so-called “Chinese debt problem.”
Prominent political figures with official positions on relations with China
For a long time, Beijing has actively cultivated political relations with the Democratic Party of Socialists, which has dominated Montenegrin politics for decades. Locally, the embassy has gradually started to engage with the new government and the parties within it.
Among Montenegrin citizens, China has the third highest favourability ratings, after the European Union and Russia, according to data from CIPE in 2020. Political parties in Montenegro mostly declare themselves pro-European, as in they support Montenegro’s accession process to the European Union. China is mostly perceived as an economic partner. Controversies surrounding the construction of the Smokovac-Matesevo section of the Bar-Boljare highway quickly became political, as the public viewed them as representing the incompetence and corruption of the government of the time.
When asking for support from the European Union on the repayment of the loan from EXIM Bank, the vice-president of the government, Dritan Abazović, openly expressed his worries about Chinese political and economic influence spreading significantly within Montenegro. A weak economy with poor infrastructure, but a good geographical position made it an ideal “European Sri Lanka”. But the construction of a highway was a bite too big to swallow for both sides. Poor economic policy choices, lack of vision, and incompetence displayed by the former Montenegrin government in this deal roped Montenegro into a significant and cost-effective investment project that would tie it to Chinese political and economic sphere of influence.
Cooperation Framework: number of state-to-state agreements, areas of formalised cooperation, agreements and projects with local authorities, exchange and training programmes with civil servants
In October 2021, CRBC supported a project of the Agency for Environmental Protection “For a more beautiful and healthier Montenegro”, which the Agency will conduct together with the Ministry of Ecology, Spatial Planning and Urbanism. CRBC will support the project with the amount of €35,000. The company probably decided on the move because of negative publicity their activities have caused, such was the devastation of Tara river canyon in some parts.
Civil society
Cooperation of various Civil Society organizations with Chinese counterparts by sector
None.
Engagement with local Chinese embassy – projects, common initiatives, etc.
None.
Most prominent local CS figures supportive of expanded cooperation with China
Non-governmental organisations in Montenegro do not have established networks of communication with Chinese organisations; nor does the Chinese embassy support the work of prominent NGOs in Montenegro. Apart from minor cultural events, cooperation with the media and NGOs remains limited.
Bilateral projects by sector
None.
Media
Media outlets with Chinese ownership
None.
Cooperation and content agreements with Chinese counterparts
None.
Exchange and other types of cooperation
None.
Media outlets with pro-China content
Chinese public broadcast companies signed a cooperation agreement with the Montenegrin national broadcast company Radio and Television of Montenegro in 2008. Other than this agreement, there are no other direct agreements between Chinese and Montenegrin media. Content that would be classified as “pro-Chinese” is barely found in traditional media in Montenegro or media personalities.
Academic research
Scope and range of academic cooperation agreements with local universities
Montenegrin academic institutions have developed strong cooperation with Chinese universities and companies over the last five years. The University of Donja Gorica (UDG) has a prominent cooperation with Chinese universities and business entities. UDG has signed agreements with ten universities in China and they have implemented student and staff exchanges with three of them: Xihua University, Beijing Union University, and Southwestern University of Finance and Economics. Companies from China that cooperate prominently with the University of Donja Gorica include Sichuan Road and Bridge Group Corp and Sichuan Tianfu Bank.
Joint academic programmes and degrees by university and subject
None.
Prominent research and academic publications on bilateral issues
In January 2021, the civil society organisation Centre for Democratic Transition (CDT) published “Vulnerabilities to Chinese influence in Montenegro”, which mostly covered the subject of the Bar-Boljare highway as the main capital investment in recent Montenegrin history.
Culture
Cultural / educational agreements at national and local level
None.
Prominent bilateral cultural projects and events
None.
Language education
In February 2015, a Confucius Institute was founded at the University of Montenegro. It primarily offers Chinese language classes to students. In 2019, a branch of the same institute was founded at the University of Donja Gorica.
Prominent organizations and artists in the areas of bilateral cooperation
None.
People-to-people interaction
Tourism
In 2019, Montenegro was visited by 2.5 million tourists from foreign countries. Tourists from China numbered around 75,000, which made up a total of 3% of foreign tourists in 2019. This is around the same number as people from Poland, Albania, or the United Kingdom. Data on the number of tourists from China in 2021 is unavailable. The two countries are too far apart for there to be a more significant flow of tourists and there is no direct air connection.
P2P exchanges via different types of institutions – educational, state institutions, etc.
None.
Prominent cases of celebrities in both countries
None.
Prominent stories of P2P interaction / personalities
None.