- 2018-10-18
Hungary-Serbia railway blocked by EU
Brussels is investigating an iconic Chinese railway project that seeks to extend Beijing's One Belt One Road project to the heart of Europe, a move that may cause conflicts between the European Commission and China.
The object of the European Commission's investigation is the 350-kilometer high-speed railway project between Belgrade, the capital of Serbia, and Budapest, Hungary. The railway is known as a landmark project of the "One Belt One Road" plan. The US$900 billion plan was initiated by Chinese President Xi Jinping. The goal is to build infrastructure in Europe, Asia and Africa and win diplomatic allies.
EU officials told the Financial Times that the investigation will assess the financial feasibility of the US$2.89 billion railway project and whether it violates the EU's laws on large-scale transportation projects that must be publicly tendered.
"The European Commission is evaluating whether the project complies with EU laws. It is currently in dialogue with the governments of the countries concerned," said a spokesperson for the European Commission.
If China's first railway project in Europe encounters a legal setback, it will become a diplomatic embarrassment for Beijing. At a summit attended by various countries in 2013, China took the railway project as a cornerstone to win the support of Central and Eastern European countries.
The European Commission’s investigation covers agreements signed by the governments of Hungary and Serbia. But the main focus is Hungary, which is a member of the European Union, which strictly applies EU procurement laws. As a potential member of the European Union, Serbia applies looser rules.
Failure to comply with EU tendering laws may be punished, fined and prosecuted in order to reverse the infringement. “In the most serious case, if Hungarians are proven to have awarded a public works contract of a certain scale without bidding, then they of course violated EU law,” said a senior EU official who refused to disclose his identity.
The contract for the $1.8 billion Hungarian section of the railway does not appear to have been made public. However, the British Financial Times last week saw a treaty dated last year between Hungary and China stipulating that companies designated by the two governments should "cooperate to develop the project."
The treaty added that two Chinese state-owned enterprises—China Railway International Group and Export-Import Bank of China—should act as contractors and funding providers for the project. The project will be implemented by the Hungarian State Railway company.
Previously, the Hungarian government did not deny the European Commission’s investigation, but stated that it signed a relevant agreement with China after negotiating with Brussels, including an annex explaining how it complies with EU procurement laws.
Chinese media reported that at the “16+1” summit between China and Central and Eastern European leaders held in Latvia in November 2016, a “contract” for the Belgrade-Budapest high-speed rail was signed.
If the railway project is frustrated, it may weaken the momentum behind the "Belt and Road" initiative. Chinese President Xi Jinping hopes that the “Belt and Road” will re-establish the spirit of interconnection that prevailed along the ancient Silk Road by building roads, railways, ports and other connecting passages, bringing China, Europe, the Middle East, and Africa closer together.
Tamas Matura, assistant professor at Corvinus University in Budapest, said: “This railway is an important part of the One Belt One Road initiative. Its Hungarian section is intended to serve as a model, showing The Chinese can build according to EU standards."
The planned railway aims to reduce the travel time from Belgrade to Budapest from the current 8 hours to about 3 hours. It also has important practical significance for China. It is a key link of the so-called "Land Sea Express Route".
In 2014, China agreed to jointly build this express line with Hungary, Serbia and Macedonia to connect the port of Piraeus in the Mediterranean. The Port of Piraeus is controlled by China.
Benchmark for the "Belt and Road" construction
At present, the construction of the "Belt and Road" has entered a critical period. my country needs to further deepen cooperation with Central and Eastern European countries and build a land bridge connecting European population and industrial centers with China. The Hungary-Serbia Railway, jointly constructed by China, Serbia and Hungary, is the most critical link.
In 2015, China and Serbia signed the "Memorandum of Understanding on Jointly Promoting the Construction of the “Belt and Road”. Serbia firmly supports the “Belt and Road” initiative and is willing to become a partner of China in the construction of the “Belt and Road”. President Xi Jinping's visit will greatly accelerate the process of China and Serbia's joint construction of the "Belt and Road" and create a benchmark for the construction of the "Belt and Road" in Central and Eastern Europe.
In recent years, thanks to the joint efforts of China and Central and Eastern European countries, the China-CEEC cooperation mechanism ("16+1 cooperation") has continued to grow and develop. Serbia can be regarded as a leading country in the China-CEEC cooperation mechanism and has been actively participating in it.
Analysts said that without this Serbia-Hungarian railway line, China may have difficulty achieving its goal of exporting products to Piraeus by rail, and then shipping them to Europe, Africa and other regions by sea. Ground.
The EU's investigation into Hungary's bidding procedures is not without precedent. In 2014, Hungarian President Viktor Orban drew an EU investigation for awarding the construction contract for a 12.5 billion euro nuclear energy project to the Russian state-owned energy company Rosatom. The funding for the project was provided by Moscow, and the project also did not hold public bidding.
The European Commission initiated an infringement lawsuit against the Hungarian government on the grounds that it suspected that the project violated internal market regulations. However, the commission terminated the investigation in December last year and accepted Hungary’s reasoning that only Russian operators could provide the specific technologies needed. However, the project also faces another investigation into the issue of state subsidies.