Why is Montenegro so poor

Motorway: Montenegro threatens to become dependent on China

Seldom has the small state of Montenegro caused so much attention in the rest of Europe as with the written request that Brussels received two weeks ago. In it, the Montenegrin government asked the EU to help it pay off a loan. On her own, she could probably not raise the 944 million US dollars that had accumulated there. The believer: China.

A polite rejection came back, in the words of Commission spokesman Peter Stano: “For Montenegro, the EU is the largest donor of financial aid, the largest investor and trading partner. But we're not paying back the loans that are taken from third parties. ”Since then, there has been a concern in the world that not a few recently had considered a more theoretical possibility. Namely, the fact that China is making states dependent on itself through loan agreements not only in Africa or South Asia, but also in the middle of Europe. The bitter irony in the case of Montenegro: The project that could ruin the country is, in the opinion of many, almost useless for the country's economy.

The dimensions of the “Autoput A1”, which is supposed to connect the Mediterranean Sea and the port of Bar with Serbia, are so gigantic that they can be easily recognized from space, as the exclusive satellite images from LiveEO show. The north-east of Montenegro between the capital Podgorica and the borders with Serbia and Kosovo is seen from there as a single sea of ​​green mountains, crossed by a few wild rivers with their stony-gray beds. Since 2015, it seems, another line has been added: the A1, which seems to arise somewhere halfway to the Serbian border and flows as a wide gray ribbon down to Podgorica.

In fact, the project is peppered with some superlatives, such as the Moracica Bridge, which spans the Tara River a good 15 kilometers north of Podgorica. Today it is not only the highest road bridge in all countries of the former Yugoslavia, the satellite images from LiveEO from 2015 and 2021 also show that the monstrous structure was completed within a very short time. In the summer of 2015, when construction of the project officially started, there was only one narrow serpentine road that led to the left and right of the river to the surrounding hills. The Chinese builders had also built a small colony of workers' huts in the valley, easily recognizable by the bright blue roofs. Five years later, almost everything has changed except for the huts: the serpentine road has disappeared, instead the finished asphalt bridge is standing, the dimensions of which can be easily measured based on the shadow cast.

But as fast as the construction process may seem by German standards, the project is clearly lagging behind the self-imposed plan, one of the many causes of the current misery. The motorway was originally supposed to be ready in 2019. If that had been achieved, the A1 would have been generating toll revenue for two years now. Money that the government could use urgently to pay off the loan.

Because the A1 project was agreed as a kind of all-inclusive package between China and Montenegro. The Chinese group CRBC guaranteed the construction of the line, and the Montenegrin state had the money for it advanced from the state-owned Chinese Exim Bank. Now the first tranche of 67.5 million dollars is due in July - in the middle of the corona crisis that hit the tourism-based state of Montenegro hard.

No wonder that people have been fighting for months about who is to blame for the delay. A piquant detail of the contract, uncovered some time ago by the local NGO MANS, is particularly in focus: the forgotten parts.

Some time after the contract was signed, it became apparent that there were some explosive gaps in the agreement. The contract included a good 40 kilometers of motorway. What was missing, however, were the costs for the necessary work on the water supply, the electricity supply - and the connections between the motorway and the existing road network. The NGO MANS estimates that the costs of these forgotten parts add up to around 100 million euros.

How inevitable the subsequent construction of the “forgotten parts” was is particularly evident at the southern end of the route. The new motorway ends on the outskirts of Podgorica directly above the Tara river - but the continuation of the expressway towards the city center and on to the Mediterranean Sea runs south of the river.

Even if these problems are likely to be resolved in the coming months, this does little to change the fundamental design flaw: with the exception of the construction companies commissioned, very few Montenegrins understand what this new road is actually about. It was praised as the beginning of an axis between the cities of Bar and Boljare, i.e. from the country's most important port to the border with Serbia, from where it should continue to Belgrade, the central transport hub of the Western Balkans.

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But there is little to suggest that this axis will soon become a reality. In Serbia, construction is proceeding at a similarly slow pace as in Montenegro; the first 30-kilometer section of the more than 270-kilometer route is currently being built.

And in Montenegro itself, the section between Podgorica and Bar is already well developed, but even after the completion of the current 944 million project, a similar section to the Serbian border will be missing. Even if everything goes well with the current loan, the government deficit will rise to around 82 percent of GDP by the end of this year after the first loan tranche has been repaid, according to the S&P rating agency. That makes the financing of a similarly sized project completely utopian. The European Investment Bank has already rejected a loan request for this twice.

Instead, since the rejection of the EU, many have been looking even more worriedly at paragraph 8.1. of the contract between Montenegro and Exim Bank. If the loan cannot be paid, it is said that it will be possible to appeal to an arbitration tribunal. That could then decide that Montenegro would have to transfer sovereign property to the Chinese state bank instead. For example the port in Bar - for whose better connection the country had only embarked on the delicate adventure.

It is still open whether it will come to that. In Sri Lanka there was already a transfer of property to the Chinese creditors following a default. There, too, it was about a port. In other projects, China was more willing to compromise, extended repayment periods or deferred parts of the loans. A victim of the “Autobahn into Nowhere”, as a documentary film about the project is called, is already clear: the Tara River, one of the few still completely natural flowing waters in Europe according to Unesco.

Even if the motorway only runs directly through the river bed in a few places, the satellite images suggest what environmentalists have been denouncing for several years: Many of the wild biotopes that exist here are likely to have been irrevocably destroyed. This can be seen, for example, in a section of the river near the end of the motorway in Matesevo, where the pictures show an almost untouched river valley before construction began. A few years later, construction roads, material storage areas and support systems have pushed Tara into a narrow, canalised bed.

The rubric "Economy from above"is created in cooperation with the earth observation startup LiveEO - a participation of DvH Ventures. The Handelsblatt Media Group is part of DvH Medien, which also includes DvH Ventures.

More on the subject:With the multi-billion "Belt and Road Initiative", China wants to increase its political and economic influence in the world. A team of researchers has now revealed the rigid credit rules with which Beijing is proceeding - also at the expense of the West. Read how China is gagging its borrowers here

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