May 11, 2021 Special Dispatch No. 9328

TASS Analysis Shows That Russia Is Playing Second Fiddle To China In Traditional Ally Serbia

May 11, 2021
Russia, China | Special Dispatch No. 9328

In the Russian pro-government press' normally rosy descriptions of Sino-Russian relations, one nettlesome topic frequently comes up – Chinese economic penetration of other countries and particularly countries where Russia occupied a strong position. Pavel Bushuev, TASS' Belgrade correspondent, in an analysis of the situation in Serbia compares the relative economic positions of China and Russia. He concludes that China is clearly outpacing Russia.

Bushuev has criticism for Serbian President Aleksandar Vucic for extending favoritism to China and silencing the local media with respect to criticism of China. Bushuev also credits China with possessing a long-range strategy that it backs financially to the hilt. However, the article accuses China of unfair practices such as creating indebtedness and dictating the terms of bilateral economic agreements, damaging the ecology, and (an unusual charge for a government press agency in Putin's Russia) working hand-in-glove with the Serbian security agencies to increase surveillance and violate the rights of privacy.

Bushuev's analysis follows below:[1]

Serbian President Vucic with Chinese Ambassador Chen Bo

"On the morning of May 3, a holiday in Serbia, President Aleksandar Vucic held two meetings with foreign ambassadors. At 9 am, he had a conversation with the PRC ambassador to Serbia, Ms. Chen Bo. Later at 10 am, the Serbian leader had a conversation with the Russian ambassador to Serbia, Alexander Bocan-Kharchenko. Vucic's meetings with the ambassadors of these countries occurred on a holiday, attesting to Belgrade's special relations with Beijing and Moscow. The order, nature and extent of the statements made at the result of these meetings demonstrate, to a certain degree, the quality of China-Serbia and Russia-Serbia relations. Unfortunately, in my opinion, Russia does not appear the leader in this comparison.

Vucic faces Alexander Bocan-Kharchenko, the Russian ambassador to Belgrade (Source:

"Of seven total paragraphs in the press service's statement about the meeting with the Chinese representative, three were dedicated to the economy, two - to the [coronavirus] pandemic, and the last two - to bilateral relations. The published message on the result of the meeting with the Russian side turned out to be noticeably smaller. Of five total paragraphs, one was dedicated to congratulating the Russian President and the Patriarch of Moscow and All Rus on Easter, one – to the [coronavirus] pandemic, two - to the celebration of Victory Day and regional issues, including Kosovo, and the last paragraph - to the economy.

"From a plain reading, it may appear that Russia's activities in Serbia are more diverse topics-wise. However, regarding the issue of economic cooperation (which is the most important topic for Serbia and the entire Balkan region) Russia is seriously inferior to the PRC. The estimates of the overall Chinese investments (about 10 billion Euros) and Russian investments (about 4 billion Euros) in Serbia confirm this impression.

"China in Serbia

"The well-known expression describing the Balkans as the 'tinderbox or powder keg of Europe' remains relevant today. Serbia is the most important and key country of the region. Accordingly, one might reach the conclusion that the significance of this small republic for the large EU may be much greater, than often presumed in Brussels. Furthermore, Beijing is well aware of this aspect. [The PRC] systematically cracks Europe open via the Balkans, as if it was a tin can.

"Back in 2009 based on the results of a seven-day-long visit by Serbian President Boris Tadic to Beijing, a strategic partnership agreement between the two countries was concluded. China's '17 + 1' initiative (Central and Eastern Europe plus China) [China-CEEC], launched in 2012 intensified these relations. The first major investment followed Chinese President Xi Jinping's visit to Belgrade in June 2016. Back then the Chinese saved the bankrupt Serbian 'Zelezara Smederevo' metallurgical company by buying it."

Smederevo steel mill (Source:

"The cooperation gained further impetus after Aleksandr Vucic took office. Nowadays, China is Serbia's third biggest trading partner (after Germany and Italy). In 2020, China- Serbia trade turnover reached 3.18 billion Euros. The largest PRC investment projects in Serbia are: the acquisition by "Zijin Mining" company of the 'Bor' metallurgical basin, the region's biggest producer of copper, gold and silver (there are plans to invest1.26 billion Euros by 2024); construction of a tire factory in Zrenjanin by the Shandong Linglong company (800 million USD investment); and the aforementioned Zelezara Smederevo, owned by HBIS Group.

"Chinese companies are widely constructing railways and highways, including a railway from the Greek Port of Piraeus to Budapest, and a route from the Montenegrin Port of Bar (China could acquire this port as a debt settlement). There is also a 3.2 billion-Euros-worth project on the construction of a sewage network and waste water treatment plants by Chinese companies in Serbia. The PRC companies along with the French ones will build a subway in Belgrade. The preliminary valuation of the project is 6 billion Euros.

"Expert Estimates

"'China's economic expansion to Europe is carried out through Serbia, because Celestial Empire [the PRC] understands that the Balkans is as an important link on the way to this goal. The "17 + 1" Initiative connects China and 17 countries of the Eastern and Central Europe. In this regard, China pays special attention to Serbia and Greece. The latter is a long-time EU member-state, from which the Chinese bought the Port of Piraeus. If they buy the Port of Bar in Montenegro or any other port on the Ionian or Aegean Seas, the land transport routes to Central and Eastern Europe will pass through Serbia. Considering the above, I believe this important fact makes Serbia the focus of Chinese investments,' Milos Banjur, a Serbian National Assembly deputy from the ruling Serbian Progressive Party (SPP), told me.

"On the other hand, various experts perceive Chinese loans as threat.

"'It is necessary to add a small caveat: investments and loans are not exactly the same thing. Loans, unlike investments, must be returned with interest. In recent years the notion is formed in Serbia through the media that equates Chinese investments with loans. By separating investments from loans, we can realistically assess the level of Chinese influence in Serbia,' said Serbian expert, Stefan Svrkota

"'The PRC is most strongly positioned in the technological branches (the powerful "Huawei" company); in the transport branches (the construction of autobahns and railways by Chinese companies, financed through Chinese loans); the mining industry (the Bor mining and metallurgical basin and Chinese factories,' Serbian expert, Stefan Svrkota told me.

"According to him, contracts for the construction of infrastructure financed by the Chinese loans and commissioned by the Chinese companies are frequently not transparent. The price is not determined through a tender. Effectively, the Serbian side is informed of price and terms without being consulted.

"'We have the example of neighboring Montenegro, which for six months now is pleading to the EU for help in repaying a debt on a Chinese loan for autobahn construction, which was also assumed under similar terms. The land plots in Montenegro, which served as security for the loan, will become the property of the China Export-Import Bank (China Exim) in case of default on the loan.'

"There are quite real concerns about where greater loan obligations to China can lead to.

"'Another controversial topic is Chinese technology giant Huawei, which along with the Serbian Ministry of Internal Affairs, creates a facial recognition network through video devices, which will provide the instant data about any citizen. The fact that such system infringes the Serbian law on the protection of personal data of citizens didn't hinder its commissioning.

"'In recent years Serbia suffers from air pollution. Occasionally heavy smog appears in Belgrade, which has never happened before. This is connected to the [activity] of the mining and processing enterprises, owned by Chinese companies. However, a taboo exists on disseminating in the media of information about these companies' impact on the ecology,' noted the expert.

"Russia in Serbia

"Russia's economic influence in Serbia is traditionally manifested in the hydrocarbons sector. Naftna Industrija Srbije (NIS), which main shareholder is [Russian] Gazprom Neft successfully operates in the country and develops actively. This company is the largest Russian investment in this sector.

"'The traditionally 'Russian sectors' in Serbia are the oil and gas industry. 90% of Russian investments go into the energy sector, while 10% are in agriculture. In 2008, Gazprom Neft acquired NIS for 400 million Euros along with an obligation to make further investments in the amount of 500 million Euros. At that time, NIS had a debt of 950 million Euros and annual losses of 90 million Euros. Gazprom Neft's total investments in NIS amounted to about 3 billion Euros. Today NIS is a role model," said Milos Banjur.

"The commissioning of the Balkan Stream gas pipeline (continuation of the TurkStream gas pipeline) has become an important stage in the development of energy cooperation between Russia and Serbia. [The Balkan Stream gas pipeline] runs for 403 km and has a design capacity of 13.9 billion cubic meters of natural gas per annum.

"Russia also extended a loan to Serbia for modernizing and constructing the railway network. Since 2014, within the project on development of the tenth Pan-European transport corridor the Russian Railways company [RZD] reconstructed the Belgrade - Pancevo, Resnik - Valjevo railways. In January 2019, RZD International and Serbian Railways Infrastructure Company signed contracts, which provide for the design and construction in Serbia of a unified dispatch center for train traffic control. The works and supply of materials for the second stage of reconstruction, modernization and commissioning of a double-track Stara Pazova - Novi Sad railway is also covered by these contracts. The railway will run for 40.44 km and provide for a maximum train speed of 200 km per hour.  Likewise, Russian Railways plans to develop a project for the reconstruction of the Valjevo - Vrbnitsa line, which runs for 210 km along the Serbian border with Montenegro.

"Speaking of Russia's influence in Serbia, the energy sector dominated by NIS, Lukoil, Srbijagas comes to mind first.

"Judging by public opinion, Russia has a significant presence in the Serbian banking sector (for example the activities of SberBank and VTB bank). Additionally, a significant presence in the Serbian infrastructure sector is occupied by a subsidiary of Russian Railways - RZD International.

"'Also, the Russian-Serbian Humanitarian Center in the city of Nis provided great assistance during the floods that engulfed the country several years ago. The church of St. Sava is nearly completed thanks to the support of the Russian Orthodox Church and NIS. The export of Serbian agricultural goods to Russia is growing too,' said Stefan Svrkota.

"'However, while there is no negative mention in the Serbian media about Chinese company activities, negative reports on the Russian companies' work occasionally appear in the media. This fact doesn't impede the further development of Russian-Serbian cooperation," claimed Stefan Svrkota.

According to Milos Banjur, research agreements in the field of peaceful uses of nuclear energy and joint projects in high tech have been already concluded.

Who is more successful?

"Essentially, the positions of Russia and China in Serbia differ historically. Serbia and Russia are tied by a common faith and fraternal relations of peoples. However, there is no Russian long-term strategy, in which the Balkans could play a key role.

"In turn, China, which began actively cooperate with Serbia only a little over ten years ago, has the goal of gaining access to the European market through the Balkan region. The PRC possesses immense means to implement such a task and is making significant progress in this regard.

"For now, the Russia and the PRC's interests in Serbia practically do not overlap, except for the Belgrade Metro project, in which Russia also expressed an interest. Instead, it can be said that Moscow and Beijing operate in the Balkans while respecting each other's interests.

"Statistics-wise, in 2020, Russia lags behind China in trade turnover volume with Serbia by almost 1 billion Euros (2.19 billion Euros against 3.18 billion Euros of Chinese trade turnover). However, Serbian experts note that the traditional historical support of the Serbian people is one of Russia's major advantages in the region (which China does not have).

"Despite the unused potential, Serbia profits from cooperation with Russia. Wherein, the Chinese 'Silk Road' initiative, which was initially perceived as a new opportunity, turned into an accumulation of loans and indebtedness to China. In perspective, this could not only greatly damage the Serbian economy, but the state as well.

"The current President of Serbia is conducting a policy of favoring China. He provides the PRC with all the necessary staging grounds for expansion into Europe. Serbia's current ruling party perceives China as a lifeline in the case of potential aggravation of relations with the EU or with Moscow.

"'Contrastingly, considering the pro-Russian sentiments of the Serbian people, the President tries to call on his Russian counterpart before each election, to invite the high-ranking Russian officials to Serbia, to emphasize that the excellent relations of our countries are based not so much on history, but on the exceptionally good personal relations between the two leaders," said Stefan Svrkota.

"Yet, the Serbian citizens themselves perceive Russia's presence 'positively.' At the same time there is 'a concern among Serbians' regarding China, noted the expert.

Pavel Bushuev (Source:


[1], May 5, 2021.

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