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China and Russia ‘Emboldening’ a New Balkan Aggressor?

Feb 13, 2022

Headlines worldwide have brought attention to the crisis in Bosnia and Herzegovina (BiH) that may lead to bloody disintegration.

The narrative is oddly familiar – a pro-Russian Bosnian Serb nationalist threatens a new war to enrich himself and the oligarchs around him.

Various political scientists and geopolitical masterminds behind bombastic articles blame a lack of European Union and United States involvement in the Balkans, while China and Russia court regional politicians, provide credit and weapons, and embolden leaders like Milorad Dodik, the Serb member of the Presidency of Bosnia and Herzegovina, while he destroys BiH from within.

Over the years, Dodik evolved to become the West’s new Balkan villain, as he deconstructed the international mandate in BiH, limiting the role of international judges and prosecutors and limiting the role of the Office of the High Representative (OHR).

China and Russia have long requested the abolition of the OHR largely because it is an ad hoc international body overseeing the implementation of the Dayton peace accords, an agreement signed almost thirty years ago that successfully ended armed conflict, but quickly became dysfunctional.

Since 1992, Bosnia and Herzegovina received about $2 billion in assistance from Washington, while the European Union has provided around 88 million euros since 2018, which ultimately went to humanitarian aid for migrants. However, has any of this money gone to jumpstarting sustainable economic growth?

Instead of blaming a handful of politicians on Bosnia’s bleak prospects, perhaps analysts should review what western oversight and aid has done for the country over the last few decades.

What has the West done?

Analysts argue that Milorad Dodik, through Chinese and Russian enablers, has systematically dismantled BiH’s institutions to eventually amputate Republika Srpska from the rest of BiH.

However, in reality, the United States and its European counterparts have failed to develop fertile ground for regional development and adequate foreign direct investment to halt Bosnia’s greatest issues – negative demographic trends, corruption, and lack of adequate infrastructure for ease of doing business.

From this perspective, we can compare Bosnia to Afghanistan. Thirty years of U.S. occupation and messy aid packages leaves Afghanistan with a population living well below the poverty line, underdeveloped industries, sectarian violence and political instability, and rampant corruption.

To solely blame Dodik, and Chinese and Russian influence is an insult to Bosnia and Herzegovina. While Russian political interests may in fact prefer a breakup of the country, Chinese investment and credit lines for infrastructure projects prove that Beijing would likely prefer a peaceful reorganization of the country, or maintenance of the status quo.

The republics of the former Yugoslavia, including the most successful and western countries, still lag significantly behind the rest of Europe in terms of living standards. Washington, only under the Trump administration, began to pump more money into the region through the U.S. International Development Finance Corporation.

While China does invest in material infrastructure projects that generate jobs, growth, and long-term prospects, Washington and the EU rant about debt traps, environmental concerns, corruption, and malign influence.

Bosnia’s public debt as a percentage of GDP is impressively low at around 37 percent. When compared to European standards, BiH can easily increase spending with the help of Chinese infrastructure projects to improve long term growth.

However, Washington also analyzes BiH through a geopolitical and security lens, pushing aggressively for NATO membership, which would only further polarize the country’s population. 

Since the U.S. only analyzes BiH from a security perspective, the Russians aim to prevent NATO’s spread, which is a vital national interest in Moscow, neither malign nor surprising, just common sense.

Beijing’s role in the Balkans

On the other hand, Beijing has pioneered a different approach to the Balkans by filling the credit void, and only financing projects that make material sense, linking the Belt and Road Initiative and using the Balkans as a clear entry into the rest of Europe for cheap Chinese goods.

Once again, ‘analysts’ shout that Chinese financing weakens the European Union, while forgetting that Germany has the most intimate trade and investment ties with China than any other member state. Others, cooperate and take much more money, and house telecommunications infrastructure, which could be interpreted as both an EU and NATO security risk.

The European Union has been severely divided since the Great Financial Crisis (GFC) after debt burdens ballooned way more than they ever reached in the Balkans. Reactions to both the GFC and the migration crises essentially divided the EU for decades until tech regulation, economic ties with China, and the coronavirus pandemic further polarized member states. 

If the citizens of Bosnia and Herzegovina experienced material improvements and wealth generation over the last three decades, they wouldn’t be concerned with murals, commemorations, massacres, genocides, and monuments, they would focus on working, saving, investing, and profiting off of slow but sustainable economic growth.

BiH’s GDP per capita in 2008 was about $5,000, today it is $6,000. The U.S. dollar had nearly a 30 percent inflation increase since 2008, while Bosnian citizens only experienced a 20 percent increase in GDP per capita since 2008 under ‘international oversight.’

To make matters worse, Bosnia and Herzegovina is consistently one of Europe’s worst performers in the World Economic Forum’s Global Competitiveness report, scoring lowest in political institutions, innovation capability infrastructure, ICT adoption, government regulations, legal framework, and future orientation of the government and responsiveness to change. Further, poor road and air transport services continue to hold the country back. In 2019, BiH was ranked 92nd on the Global Competitiveness Index behind Botswana, Ecuador, Algeria, Lebanon, Tunisia, Sri Lanka, Jamaica, and Trinidad and Tobago. Croatia and Serbia were ranked 63rd and 72nd respectively.  

Fifteen percent of BiH’s population have left the country for economic opportunity since 1995, while the remaining population is still relatively educated, healthy, and living in urban centers to represent a reliable labor source that just needs solid and predictable jobs.

Chinese investment in BiH has included coal plants that the EU is concerned about over environmental issues, but also includes highways linking the Republika Srpska entity and the rest of BiH.

Chinese loans target infrastructure projects, which can lift living standards instead of just fueling political corruption without building anything at all. Eighty-four percent of IMF COVID-19 loans encourage austerity measures, even to the poorest of nations, which would cut public healthcare systems, pension schemes, and wage flows to public sector workers like doctors, nurses, and teachers. Debt-servicing consistently takes precedence over health worries and living standards. In contrast, Chinese debt is invested in complex infrastructure projects that should, in theory, generate growth instead of servicing past debts. 

Although Dodik appears at fault for all of Bosnia’s problems, the truth is that not much has happened since 1995 except for the severe population decline. If a company continuously underperformed for nearly three years under a particular strategy, plan, or board, a business expert would obviously suggest transformational change to prevent further decline. 

It is time that we review the work of those responsible for BiH since 1995, and determine if they deserve to keep their jobs. 

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