Serbia To Become Route Between Eurasia & Europe As It Signs Off EAEU Free Trade Deal

Russia and China making trade inroads into South-Eastern Europe

Op/Ed by Chris Devonshire-Ellis

The Russian Ambassador to Serbia, Alexander Botsan-Kharchenko has announced that Serbia will sign off a Free Trade Agreement with the Eurasian Economic Union (EAEU) on 25th October. The EAEU comprises Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia and is a free trade area sitting between China and the European Union. Vietnam currently has a FTA with the EAEU, while China is currently negotiating terms over product inclusions in the non-preferential FTA it signed off last year.

The addition of Serbia as an FTA partner is an interesting one as it borders EU members Hungary, and Romania both of which has expressed reservations concerning EU policies and which also all maintain good relations with Moscow, as does Bulgaria. It essentially provides Russia and the EAEU countries with a market place for duty free Russian and EAEU goods in the middle of the southern European Union. Brussels will be concerned at this influence given the differences it currently has with the UK, in addition to existing tensions between Brussels, Budapest and Bucharest.

Botsan-Kharchenko commented that “On October 25, an agreement is expected to be signed on a free trade zone between Serbia and the Eurasian Economic Union. This is a significant event. The EAEU is an effective, up-to-date integration project. For Belgrade, the implementation of the document will mark a completely new stage of presence in Eurasia, entering a market with a capacity of over 182 million consumers and the combined GDP of more than $1.9 trillion. In the future, Serbia may become one of the links in the space between the EU and the EAEU.”

The other intriguing aspect of the Serbian decision to join the EAEU is that it now cannot join the EU. Additionally, China has established the so-called “17+1”, a dialogue bloc officially known as the Cooperation between China and Central and Eastern European Countries and which includes Serbia in addition to Albania, Bosnia & Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Greece, Hungary, Latvia, Lithuania, North Macedonia, Montenegro, Poland, Romania, Slovakia and Slovenia.

Several of these countries have joined China’s Belt & Road Initiative and have commenced infrastructure projects to further develop interconnectivity between them, sometimes upsetting Brussels. An example is Brussels insisting that Hungary followed EU tender compliance directives, for a project financed wholly by China, to link Budapest with Serbia’s Belgrade, a non-EU state. That perceived interference from Brussels upset both Budapest and Belgrade and almost certainly contributed to Serbia signing off an FTA with the EAEU, which does not impose such demands on construction projects.

Serbia and Hungary are not alone in this disquiet with the EU. However, several other EU members are also critical of the EU, which remains dominated by Northern Europe and France and Germany in particular. Maybe are appalled at the treatment of the UK concerning Brexit, having previously viewed the UK as a balance between Paris and Berlin. With that now being removed, eastern and southern EU members, are concerned that interference most notably in much-needed financial investment by China into cross border EU projects between EU members and non-EU states to the east and south Europe has caused unnecessary infrastructure improvement delays. Greece meanwhile is heavily indebted to the EU, and like Italy, is looking at alternatives to EU funding to enable it to continue with much-needed infrastructure developments. The Greek Port of Piraeus is a major gateway to the EU along the Belt & Road Initiative and is now mostly owned by China Shipping Company (COSCO), who acquired a 67% stake in 2017.

With China influencing the South-Eastern part of the EU, a combination of Chinese investment and the prospect of an alternative trade bloc including Russia and other ex-satellite Soviet states appears increasingly appealing at this stage, and the decision by Serbia to join the EAEU may well be followed by other surprises.