The New Silk Road and Eastern Europe

September 9, 2015 5:00 PM

In April 2012, when serving in the Bulgarian government as deputy prime minister and minister of finance, I received an unexpected call from my prime minister: to get on a plane immediately and participate in a China–Eastern Europe economic forum the next morning in Warsaw. The forum was hosted by Polish prime minister Donald Tusk, on the heels of a visit of Chinese premier Wen Jiabao to Western Europe.

Such events generally get organized months in advance, not the previous day, so I expected a low-key affair. To my surprise, nearly all prime ministers from the region were in attendance. There was first a joint meeting where premier Wen Jiabao stated that he had asked for this meeting to announce the start of a major initiative on China's part: including Eastern Europe into a large Eurasian infrastructure project, linking the two continents through land, sea, and rail. Details were to be announced soon, and China wanted to co-organize an annual event in different Eastern European capitals to gauge progress. He also asked that the afternoon be devoted to bilateral meetings to understand the infrastructure needs of each country.

Later that day, I met prime minister Wen Jiabao one-on-one and described to him the various infrastructure projects that Bulgaria was undertaking—chiefly using cofunding from the European Commission. We spoke about regional projects as well—for example linking Central Europe to Greek ports via rail and highway.

The following year this Eurasian initiative was named the New Silk Road, and at annual meetings between East European and the Chinese prime ministers in Prague (2013) and Belgrade (2014) some concrete projects were discussed and signed. One such project was based on the idea of connecting Budapest and Athens via a fast-speed rail, to move (mostly Chinese) cargo from the Greek port of Piraeus towards Austria and Germany. In particular, China is financing the construction of a bridge over the Danube in Serbia and a Budapest-to-Belgrade rail at a total cost of $2 billion. Both projects are now under way. The high-speed rail will continue through Macedonia and Greece to the Mediterranean Sea. The port of Piraeus, already privatized to the Chinese company COSCO in 2010, will be the endpoint.

Since this inauspicious start, the New Silk Road has become a buzzword in Eastern Europe. Poland, Hungary, Azerbaijan, and Georgia have all joined the Asian Infrastructure Investment Bank (AIIB)—a related effort of the Chinese government to pull together resources into building infrastructure in Eurasia. Several former Yugoslav countries like Serbia have also expressed interest in joining.

The port of Piraeus, thanks to Chinese investment in upgrading and expanding its container terminals, has become the fastest growing port in Europe, and by end-2016 should have the same capacity—6 million containers a year—as the ports of Rotterdam, Hamburg, and Antwerp.

And several other highway projects, for example linking Black Sea ports and Georgia's capital Tbilisi, are near signing. In the early discussions, Chinese negotiators required sovereign-backed guarantees for the financing of such projects. This created problems with national fiscal rules as such guarantees need to be voted in parliaments. More recently China has decided to forego this requirement.

In countries that have pre-accession status to the European Union or have yet to embark on that path, China's New Silk Road is an attractive instrument to finance large infrastructure. Even as, historians in the region argue, much of Eastern Europe was not part of the original Silk Road.