Will Bosnia Cut the Chinese Cord?

The West funds Bosnia Herzegovina. Most of the money goes to China to build tech and infrastructure projects. This dependency is dangerous.

Huawei is building a new telephone network. Chinese contractors are constructing new power plants and a new highway. The United States and European Union are paying. Since 1995, the US government has invested more than $2 billion to support Bosnia and Herzegovina, and the EU funds much of the country’s Chinese-built infrastructure.

Both the EU and the US are determined to “de-risk” from China. Bosnia and Herzegovina and the rest of the Western Balkans are behind. De-risking represents a particularly tough task in the Balkans because of the region’s convoluted politics, and in Bosnia Herzegovina, because of the decentralized government. But there’s some hope thanks to European and American pressure and the arrival of a new federal government in Bosnia Herzegovina.

Total Chinese investment in Bosnia Herzegovina is impossible to calculate. Central Bank figures remain incomplete, failing to include statistics from the country’s its two entities, the Republika Srpska and the Federation of Bosnia and Herzegovina.

Investments in a new highway from the Croatian border to Central Bosnia are not published. Instead of showing the project’s total cost, spending is divided into tranches of approximately 20 miles each, leaving open the possibility of unexplained increases and making it hard to calculate the entire cost. Most of the highway’s funding comes from European Bank for Reconstruction and Development (EBRD).

Other hard-to-calculate Chinese construction projects are power plants. The US Export and Import Bank (EXIM) gave a concessional loan for up to €1.3 billion to build climate-friendly renewable energy projects. After the US company General Electric stepped back from a coal-fired project, Chinese contractors came in. Instead of windmills, most of the new Chinese built new plants are coal-fired. Just as bad, no official financial reports are available about these projects.

Telecommunications represent a particularly sensitive sector. The US and EU are pushing to limit Chinese influence over next-generation networks. Yet the Bosnia Herzegovina federal government-run BH Telecom picked Huawei as its main supplier. So has the Republika Srpska’s M:Tel. In contrast, the Bosnian Croatian provider Eronet uses Ericsson infrastructure. When Ericsson complained in court about the BH contract with Huawei, it lost. The security dangers of allowing Chinese spying on Bosnian mobile phone calls never were considered.

During the Covid crisis, Bosnia Herzegovina continued to run up unsustainable Chinese debts. The government bought Chinese ventilators and vaccines. Most of the contracts were not transparent. 

Today, the country is struggling to keep up with its debt. Bosnia’s Republic Srpska was scheduled to pay back €200 million of bonds sold on the Vienna Stock Exchange at the end of June.  Another  €500 million taken from different financial institutions will come due by the end of the year. A delegation led by Republika Srpska Prime Minister Radovan Viskovic recently traveled to China pleading for debt relief.

The Chinese refused. Republic Srpska could soon find it difficult to pay its government salaries.  Rattled, the Serb leadership has taken dangerous steps towards legal secession from the rest of Bosnia and Herzegovina.  In their romance with Beijing, the Bosnian Serbs are supported by Serbia.

Leading politicians are implicated. In March, the US Department of Treasury sanctioned the former chief of the Intelligence Security Agency, Osman “Osmica” Mehmedagic, and two others for allowing the country’s biggest Bosniak party to use cellular data to follow the movements of opposition politicians. 

The US also imposed sanctions for corruption late last year on Republika Srpska minister Dragan Stankovic. He allegedly sought to “usurp” state property in contravention of the national constitution. The Republika Srpska government responded by cutting ties with the US embassy in Sarajevo.

The European Union is taking a similarly tough line. Under the Dayton Peace Accords, High Representative Christian Schmidt can fire leaders. This past April, he amended the constitution to help form the new federal government after a deadlock lasting almost seven months  His moves signaled a break from the former German-led policy, which pushed Bosnia to be soft not only on China but also with Russia.

The new federal government has an opportunity to shift west away from China.  Headed by ethnic Croat Borjana Kristo, it aims to return to the path toward EU membership.

The steps needed are clear. BH Telekom should select a non-Chinese vendor for its next-generation network. The Chinese energy projects should be stopped. Chinese-built infrastructure projects should become transparent. With US and European support, Bosnia still has an opportunity to loosen the Chinese grip.

Emir Kremic is the head of the Federal Institute of Statistics of the Federation of Bosnia and Herzegovina and Co-Founder of Auroris AI.

He received BSc from the University of Buckingham, and his MSc and Doctorate are in the area of computer science and information technology and is a pioneer in the field of biometric artificial intelligence and facial and biometric security.

Bandwidth is CEPA’s online journal dedicated to advancing transatlantic cooperation on tech policy. All opinions are those of the author and do not necessarily represent the position or views of the institutions they represent or the Center for European Policy Analysis.