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Romania: Chinese Are Coming!

Communist Romania, in 1949, was one of the first countries to recognize the communist People’s Republic of China. In 2007, Romania joined the European Union and has felt like a second-class member since – a market for European goods and services, but not a full partner. Prime Minister Victor Ponta is striving to demonstrate to Europe that Romania has alternatives by selling resources to China: “Economically, Romania sold itself short, trading valuable energy and raw materials for a few infrastructure projects and a bit more trade, ” writes journalist Raluca Besliu. China will build a high-speed rail in Romania, invest in its IT industry to create 1,200 jobs, and increase purchases of livestock from Romanian farmers. Germany and France are major trade partners, too, but have annoyed Romania and Bulgaria by blocking them from the so-called Schengen agreement, which allows citizens of 26 European nations to travel freely across borders. Romania, Poland and Turkey are pursuing stronger ties with China in part because of resentment about being marginalized by the European Union. – YaleGlobal

Romania: Chinese Are Coming!

In rebuff to EU, Romania sells resources to China for a bit of trade
Raluca Besliu
YaleGlobal, 4 March 2014
Romania looks East: Chinese Premier Le Keqiang is greeted by Romanian Prime Minister Victor Ponta in November 2013 (top); Chinese  telecom company ZTE will invest in Romania

BUCHAREST: Li Keqiang visited Romania in November, the first visit by a Chinese premier in nearly two decades, in an effort to deepen cooperation between the two countries in fields such as energy, trade, investment and infrastructure. Bilateral discussions were followed by a meeting with the countries in central and eastern Europe to promote regional cooperation.

This year marks the 65th anniversary of the establishment of Romanian-Chinese diplomatic ties, as communist Romania was one of the first countries to engage with the People’s Republic of China. Li’s November visit followed the July 2013 visit of Romanian Prime Minister Victor Ponta to China to propose boosting the two countries’ strategic partnership to celebrate the anniversary.

Chinese officials have taken Ponta’s offer seriously, but on their own terms. In a joint statement issued after their meeting in Bucharest, Romania’s prime minister and his Chinese counterpart stressed that they see their countries’ partnership as exemplary for interstate relations. Li suggested that the Romania-China cooperation could become a model of cooperation between his country and central and eastern European countries and could insert new impetus in Chinese-European relations.

Economically, Romania sold itself short, trading valuable energy and raw materials for a few infrastructure projects and a bit more trade. From a political standpoint, though, by underscoring that it has viable alternative economic partners, Romania is standing up to European Union counterparts, which have used the Romanian market for their products, but repeatedly treat the Eastern European country as a second-class member of the Union.

Chinese investments will focus on the Romanian energy sector, with most of
in nuclear energy.

The largest part of the Chinese investments promised will focus on the Romanian energy sector and amount to more than €7 billion. According to the Romanian prime minister, the Chinese will invest around €6 billion in nuclear energy, partly to support group 3 and 4 of an already existing power plant at Cernavoda and partly to construct a new power plant at Tarnita.

Romania should proceed with caution. In 2012, after a safety review of Chinese nuclear power plants, the chairman of China’s State Nuclear Power Technology Corporation acknowledged in passing that problems in 14 areas needed to be resolved, some of which would take three years to fix. But he was mum on the nature of these problems, where or how serious. According to a Transparency International report, Chinese companies are notoriously non-transparent, disclosing the least financial data on a country-by-country basis, in order to avoid accountability. For 2013, Romania ranked 69 and China ranked 80.

Apart from this, Romania chooses to focus on nuclear energy when many European counterparts like Germany and France are committed to reducing reliance on nuclear power, a response to the Fukushima disaster. A failure to provide close oversight of the Chinese investment could cause tension with other member states. While the United Kingdom is also building a new nuclear power plant in Somerset with two Chinese investors, the consortium will be led by France’s EDF, which has decades-long experience in nuclear energy and can ensure adequate supervision of the construction and operation phases. In response to the Fukushima accident, EDF promised to become more transparent with communities and stakeholders, by providing an open reporting culture and working closely with safety, environmental and security regulation and communities around their sites. This is not a commitment that the Chinese are likely to make for Romania.

In exchange for much needed energy, the Chinese will build a high-speed train project for Romania, starting with a pilot project of around €500 million, while also investing in Romania’s IT sector to create around 1,200 jobs.

So far, Romania is blocked from the Schengen area in Europe – citizens of 26 nations can travel freely across borders.

Another bit of good news for Romanian farmers, hurt by declining demand in European markets: Chinese officials also signed two agreements with their Romanian counterparts to import 500,000 cattle and 3 million pigs during the next years, while also showing interest in importing sheep and other food products. Over the next 10 years, China’s meat demand is expected to rise. China’s growing middle class and fast-paced urbanization have altered the Chinese diet, with meat being increasingly present alongside rice and vegetables.

Romania is an important market and counts Germany, Italy and France among some of its key trading partners. Even so, Germany and France are currently the most vehement opponents of allowing Romania, alongside its neighbor Bulgaria, to enter the Schengen area – now limited to 26 European nations that allow citizens to travel freely across borders – despite fulfilling all technical requirements. Security concerns, as well as fears of a Romanians pursuing jobs, have been invoked as the key argument for not including these two Eastern European countries in the Schengen area, and Ponta has accused fellow EU member states of resorting to populist policies to appeal to voters during this electoral year.

During the Chinese visit, the Romanian prime minister emphasized that, while the EU’s rules of competition will be observed, Chinese companies will be chosen if their bid is strong from a technical and financial point of view. Given the notorious levels of corruption in Romania and China, this news should be received with skepticism.

When questioned whether or not Romania is becoming too close to the Asian giant, Ponta emphasized that all the key Western political leaders, including the US president, the German chancellor and French president, have established strong economic relations with China, and that Romania should take advantage of the same opportunities.

Partnering with China, competition for EU companies, underscores the concerns about EU marginalization.

Romania is not alone in forming a partnership with China. Poland also signed a strategic partnership, focused on boosting Polish imports to China and encouraging Chinese businesses to contribute to its infrastructure construction.

Likewise in September, Turkey, which has repeatedly suffered delays in its bid for EU membership, chose the state-run China Precision Machinery Import-Export Corp over US and European competitors to create missile defense systems, in order to grow its domestic arms production. Rapidly expanding bilateral trade between China and Turkey as well as the latter’s acceptance as a dialogue partner in the Shanghai Cooperation Organization mark a deepening relationship. 

Closer Romanian-Chinese relations have just started. Next year and subsequent ones will reveal to what extent China can be a viable partner for its Eastern European counterpart, and China’s partnership with Romania might be an early attempt to tap into central and eastern Europe’s energy reserves and trade opportunities. So far, China seems determined to implement the same strategies as in Africa, where it offers infrastructure and expands trade in needed or advantageous fields, while taking over energy resources required to keep its economy prospering.

But with the move toward China, Romania has signaled a changing approach toward European counterparts. It is not afraid to explore economic alternatives. The partnership with China –creating competition for EU companies – sends a powerful message about the deep concerns felt in Romania and elsewhere in central and eastern Europe about being marginalized within the EU. European counterparts may have to reconsider their policies toward fellow member states.

 

Raluca Besliu is a freelance journalist focused on women's and children's rights, refugee and human rights issues, and peace and post-conflict reconstruction. She graduated from the University of Oxford with an Msc in Refugees and Forced Migration after studying international affairs at Vassar College. She founded the nonprofit organization Save South Kordofan. Follow her on Twitter: @Raluca_Besliu 

Rights:Copyright © 2014 The Whitney and Betty MacMillan Center for International and Area Studies at Yale

Comments on this Article

10 March 2014
Schengen Space Clarification:
Romanians and Bulgarians can travel at will in all the countries comprising the Schengen space (no visa is required for most of the countries or they have visa free travel agreements).
What the Schengen space membership does is to eliminate the border control between Romania Hungary, Bulgaria and Greece The two countries will be responsible for the border control with the non EU or non Schengen space neighbors. Matter of fact, as the comment above shows. the impact on non-memebership is insignificant for travel and economy and only applies to long wait time at the borders with EU countries. Both countries are able and equipped to provide quality border control for EU,but the constant objections from 2 or 3 EU countries prevents the formal membership. Although this does not have anything to do with reality is being used by some countries to try to preserve the so called second class EU status. A while ago Romania declined to actively seek member status in the Schengen zone since the benefits are not there.
With China or not Romania's economy is going strong and there is no way other than up.
-Mikael , Romania
5 March 2014
Thank you for this enlightening news-update and perspective.
-ALLAN CRUSE , Chinese investing in Romania
5 March 2014
I don't understand why the author says that the Chinese bought energy “paid” in construction projects.
I don't think that they will carry the ELECTRIC energy produced by the nuclear plants build in Romania back to China.
Secondly, I don't understand why choosing in advance Chinese constructors is not a breach of the EU competition rules.
Thirdly, Romania's Schengen non-membership has a trivial impact on Romanians and the Romanian economy. It is more of a symbolic nuisance. Not a reason to let second-hand constructors try their hand at building a nuclear plant...
The author doesn’t mention either that Ponta will not stay in power for ever and that Romania has a reputation of changing its mind.
-George , unconvincing