The EU offers a late bid to compete with China on the Silk Road – POLITICO

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More than 3,000 days after President Xi Jinping came up with a plan in 2013 to invest massively in critical infrastructure such as railways and ports connecting China with the rest of the world, EU officials have finally come up with an alternative scheme.

European Commission President Ursula von der Leyen will on Wednesday unveil the European counterattack to the Xi’s Belt and Road Initiative (BRI) and explain how the EU will try to exert influence along the 21st century version of the Silk Road.

The big idea behind Europe’s Global Gateway strategy is to mobilize up to € 300 billion in public and private funds by 2027 to fund EU infrastructure projects abroad. This means building next-generation infrastructure such as fiber-optic cables, 5G networks and green energy plants in developing countries, while also trying to compete with China on transportation facilities such as highways and airports.

It’s a long shot in terms of catch-up matches.

Even if private investors join, the EU’s spending plan falls far short of what is estimated to be China’s coughing up, and Beijing has bought itself into influencing with first-mover advantage in countries from Greece to Sri Lanka. The EU boasts that its main selling point is more transparency and higher environmental standards than China, although it does not always go down well with many of the potential partners who prefer opaque Chinese agreements.

The Commission’s plan, the draft of which was seen in POLITICO’s Brussels Playbook, will not include a list of projects to be launched immediately, which provoked criticism from some EU and Member State officials, who call for a more concrete response to China’s initiative of more than 13,000 projects in 165 countries.

“It is nothing more than a declaration of intent, a political declaration,” said an EU official. “It sends a strong message to China by emphasizing democracy and values, but more needs to be done to actually implement them.”

Investment in infrastructure or connectivity has become an important battleground for geopolitical influence as China has expanded its strategic reach to parts of Africa, Asia, Latin America – and Europe. Critics say, however, that Beijing has created debt dependency in nations ranging from Pakistan to Montenegro, where many projects are also falling short in terms of sustainability. Intelligence experts, such as the British MI6 chief Richard Moore, warn that Belt and Road also create “data traps” by collecting critical data from communities around the world.

The EU’s recent action is part of a broader international setback. US President Joe Biden and other leaders of the G7 group of leading economies have this year committed to a different vision for major infrastructure projects called Build a better world back.

Von der Leyen’s plan involves investments of € 135 billion under an existing Sustainable Development Fund and up to € 18 billion in grants under other EU external assistance programs. She will also announce € 145 billion in “planned investment volumes” from other European development finance institutions.

During an excavation in Beijing, the EU draft plan states: “Without proper transparency, good governance and high standards, projects can be poorly selected or designed, left incomplete or used to boost corruption.”

EU values ​​in the value chain

Europe’s new strategic vision is still overshadowed by Chinese spending. Beijing’s total BRI spending could reach $ 1.2 trillion- $ 1.3 trillion by 2027, according to Morgan Stanley, although there have been recently proposals that the Chinese system may be losing momentum due to fears of corruption and overpricing.

For the EU, the crux of the matter is whether politicians can persuade private companies to join and invest strategically in an equally effective way as Chinese officials have done, backed by the grandeur and power of a state-run model.

Beijing’s success with BRI lies in part in the fact that state-owned commercial banks are part of the game, enabling companies to make even politically or commercially risky investments.

Reinhard Bütikofer, the leading EU legislator in Chinese affairs, said the EU will have to engage business. “Unlike China, we do not order companies; we work with them,” he said. “By the end of next year, projects in different regions of the world should be well underway.”

The EU will emphasize the need for partner countries to comply with rules such as good governance and transparency – the same requirements that drove many of these developing countries to China’s independent investment in the first place.

Some are hoping for a different result this time, as the Belt and Road’s debt trap model is now better understood. “Instead of giving countries an offer they can not refuse, the EU will give them an offer they do not want to reject. That is the biggest difference between Global Gateway and Belt and Road,” said Bernd Lange, president of the association. European Parliament Committee on International Trade.

Insists on Europe A pledge of 300 billion euros was not to be sniffed at, said Jonathan Hillman, a fellow at the Center for Strategic and International Studies and author of two books on the Belt and Road Initiative, that EU spending could be “compared” to Beijing’s financial commitment. He added that the EU plan could be attractive for ecological reasons.

“Some of the comparative benefits here for the Global Gateway include having higher environmental standards,” Hillman said. “We have seen cases where local groups, like in Kenya … have mobilized against Chinese projects because they do not have the same environmental standards.”

Meanwhile, business lobbies are insisting that the EU plan should not mean pushing China away. In response to the draft Global Gateway strategy, the BusinessEurope lobby group said the EU should continue to “work with China to determine priority corridors to prevent possible bottlenecks and transport restrictions.”

“The EU-China political context is not the best at the moment, but we must maintain dialogue and cooperation in areas where it makes sense from an economic but also geopolitical point of view,” said Luisa Santos, the group’s deputy director general.

Divisions within

You do not have to travel too far to find supporters of China’s investment initiative. In fact, there are some diehard fans within the EU.

Greece’s Piraeus port, one of the busiest container terminals in the Mediterranean, has China’s state-owned COSCO as its main shareholder and is constantly hailed by Beijing as the poster child of the Belt and Road.

In a call with Cypriot President Nicos Anastasiades on Tuesday, China’s Xi said: “Economically, [China and Cyprus] has collaborated effectively in the fields of energy and telecommunications and is a partner in Belt and Road. “The country has partnered with Beijing on a € 290 million contract to build a liquefied natural gas terminal project.

Meanwhile, the EU’s Global Gateway initiative also includes a reference to “space-based secure communications systems”, an embryonic scheme promoted by Internal Market Commissioner Thierry Breton, which would see the EU support a telecommunications satellite constellation to compete with SpaceX’s Starlink and the UK OneWeb .

The idea is that such a network could be used to exclude black spots on the internet across Europe while doing the same for parts of Africa, Breton has previously explained.

The satellite scheme is popular with France’s major space giants, but some countries – including Germany – are skeptical of the plan.

“A strategy is lacking,” said Thomas Jarzombek, a German lawmaker who pursues space policy for the current outgoing government in Berlin. Do we want to go to the commercial markets and be cost effective, or do we need a communication tool for governments that is maximally secure?

“You can not achieve everything, you have to make a decision,” Jarzombek said.

Such criticism and the absence of allocated funds to push that satellite project forward make it unlikely that a major Brussels space plan will soon take off.

Aside from such headaches about divided loyalties and unclear priorities, German EU Ambassador Michael Clauß insisted that Europe had to make the investments to stay afloat on the international stage.

“Global Gateway has the potential to make the EU a more effective geopolitical player,” said Claus. “For many partner countries, the offer of rule- and value-based cooperation … will be an attractive alternative to the Chinese Belt and Road Initiative.”

Jakob Hanke Vela contributed with reporting.

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