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I will begin by saying that everything that is happening right now and everything that is still to come has already happened, writes investigative journalist Zintis Znotiņš.

The only difference is that the occurrences taking place at this moment have assumed a more modern shape. With this I mean that what is now often considered a breakthrough or an innovation is actually something developed long ago, only now it is dressed in a new understanding and wrapped in new technology to fit the current era.

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China is a country with an ancient past that preserves and follows its traditions, and for this reason one can try to understand China’s actions by viewing them through the prism of history. Most of the world is familiar with Sun Tzu, the Chinese general, strategist and philosopher who lived either in the 6th or 4th century BC.

It was due to Sun Tzu’s victories that his country grew more powerful. When he retired, he wrote the military treatise The Art of War, which is one of the most popular pieces on politics and strategy.1 I am more than certain that the Chinese ruling elite, including heads of different services, have read Sun Tzu’s work. Therefore, we can find many cornerstones of China’s behavior in the writings of Sun Tzu.

He writes: "Therefore, one who is skilled in warfare principles subdues the enemy without doing battle, takes the enemy's walled city without attacking, and overthrows the enemy quickly, without protracted warfare. His aim must be to take All-Under-Heaven intact. Therefore, weapons will not be blunted, and gains will be intact. These are the principles of planning attacks. If some time ago the notion of 'the art of war' could only be imagined in the context of an armed battle, then now countries try to reach their goals by sending diplomatic and financial means to the battlefield."

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We can look at it this way: at one time in our history it was possible to seize power over a city or country using force; now, however, it can be done with financial instruments. There are numerous ways to do this – from the most basic ones such as bribes, to more refined ones like investments, grants and loans. Thus, the more primitive method of war that uses weapons is being replaced by a more elaborate battle, the main weapon in which is MONEY. And I don’t mean the cheap bribery cases.

The reality is much more complex, and initially no one even dares to suspect the true intentions of their “benefactor”. One of the largest players taking part in this game is China. Over the last two decades, China has become the largest global lender, with outstanding claims exceeding 5% of global GDP. In total, the Chinese government and its companies have handed out $1.5 trillion in direct loans and trade credits to more than 150 countries.

This has turned China into the largest creditor in the world, surpassing such organizations as the World Bank, the International Monetary Fund or all of the OECD creditor governments combined. It should be noted that many of these Chinese loans are secured, meaning that the loan is repaid from revenue gained, for instance, from exports. Numerous countries already owe China at least 20% of their nominal GDP (Djibouti, Tonga, the Maldives, Congo, Kyrgyzstan, Cambodia, Niger, Laos, Zambia, Samoa, Vanuatu and Mongolia).2

The “loan diplomacy” actively employed by China in recent years is aimed at gaining political influence in “vulnerable” countries in the Asia-Pacific region.3

It is most likely that China would not mind if other nations in its sphere of interests would also express enthusiasm for large loans or grants, because then it would only be a matter of time until China calls the shots in these countries. Luckily, most countries can resist the temptation to acquire such easy money. We can draw parallels with mortgage loans or the short-term loan business. It is easy and fulfilling to borrow money, but when the time comes to return the money, then…Of course, China will be very friendly and flexible during the talks concerning the repayment of the loan.

If you are unable to return the money, we could decrease the sum or even write off the loan, but for us to do this we will ask you to do this and that. What exactly can China ask for – the possibilities are endless: starting with more lucrative conditions in mutual trade or international lobbying, and ending with the long-term rent of specific objects.

However, I already said that most countries don’t want anything to do with China’s primitive loans, but this doesn’t mean China intends to cease. Instead, China has decided to take a relatively longer road for achieving its goals, and this road is the most dangerous, but also quite steady and effective – investments. China has now invested in several mega-projects. I will name only a few: Pakistan has seen large investments: for instance, $46 billion were used to transform Pakistan’s transportation and electric networks.

The Karachi nuclear project K2/K3 is mainly funded by the Chinese state-owned Exim Bank which transferred over $6.6.bn in three payment stages. The transport infrastructure in Ethiopia also received investments. This is most visible in the country’s capital Addis Ababa, where China sponsored a large part of transport projects, from new bypass roads to the first metro system in Sub-Saharan Africa.

From 2000 to 2017, Sri Lanka, a country in serious debt, received more than €12bn from China in the form of loans or grants. Until 2017, the government of Sri Lanka was burdened by the loans of the previous administration. The Hambantota port project, which concluded in 2011, was funded by the Chinese government that hired a state-owned company to carry out the construction of the port employing mainly Chinese workers.

After months of negotiations, the port was commissioned along with the surrounding land that was leased to China for 99 years. This illustrates the true intentions of China, which has now acquired a port in the direct vicinity of India for a couple of years.4 China has been studied extensively, and it has been concluded that the main concerns are caused by the situation in Pakistan and Sri Lanka, where China’s “loan diplomacy” has reached a level where the governments of these countries are forced to hand over their strategic objects to China, for example, ports or military bases.5

Belarus signed an agreement with the Shanghai branch of the China Development Bank in late 2019 on receiving a loan of 450 million euros. This loan is not intended for a particular project and can be used for different purposes, including repaying government debt, maintaining Belarus’ gold and currency reserves and furthering trade between Belarus and China.6

One of the largest projects, however, is the famous Belt and Road Initiative (BRI) which is a global development strategy adopted by China in 2013 that foresees infrastructure developments and investments in at least 70 countries and international organizations in Asia, Europe and Asia.

The Chinese government says the initiative “is aimed at improving regional compatibility and supporting a brighter future”. Some observers see it as Chinese dominance in global affairs by exploiting its trade network. The project is expected to conclude in 2049, which happens to coincide with the 100th anniversary of the People’s Republic of China.7

Presently, China has signed cooperation agreements concerning the BRI with 138 nations and 30 international organizations. Looking at the intentions of China 8, there are no questions about who intends to become the biggest global player. The list of countries engaged in China’s project is quite extensive, so I will name only some: Poland, Greece, Portugal, Italy, Austria, Luxemburg, Switzerland, Armenia, Azerbaijan, Russia, etc.

If we look at the geographical coverage, the expected construction works will take place in Africa, Europe and Asia. The Baltic states are not directly engaged in the BRI project, but this doesn’t mean that China is not interested in furthering its influence in the region, as the Baltic states are members of the EU and NATO and somewhat able to affect the decisions made by this organizations. Therefore, we can’t say that China has completely excluded the Baltic nations, including Latvia, but it should be noted that by looking at the amount of investments received we are not China’s main concern, not even close.

In 2016, China expressed interest in investing in the railway project Rail Baltica 9, but the interest did not manifest in actual funding. But it is not completely true to say that China has lost interest in the project. In March 2019, head of Rail Baltica business development Kaspars Briškens confirmed that “there is actually significant interest from the Chinese side.” Now, China is considered one of the world’s leaders in developing high-speed rail technologies. “Rail Baltica commercialization plans could foresee attracting Chinese cargo flows in the future, including attracting Chinese investment for the development of logistics and cargo handling infrastructure,” Briškens said.

China’s investment activities in other countries, for instance, the construction of logistics centers in Poland and Belarus signal of its wishes to receive additional privileges. Most often, these privileges manifest as the requirement of allowing Chinese workers into the country.10

This backs the assumption that Chinese investments and other types of assistance are not based on mere unselfishness and willingness to help. On the first glance it may seem that that’s no big of a deal ­– let the Chinese themselves do the construction. We should remember Soviet times, where one of the USSR’s deliberate strategies was to overflow the republics with large masses of foreigners.

For example, in 1935 63% of the residents of Riga were Latvians, but in 1996 this dropped to 38%.11 In the late eighties, the idea of bringing 10,000 construction workers to construct a metro was the decisive factor that made the public protest against it. As I have already expressed, China is the ideological brother of the USSR. China is well aware that in the long-term it is necessary to station as many of its citizens as possible in a territory it is interested in. In addition, the more Chinese people there are in a particular territory, the greater the freedom of Chinese secret services to act there.

This brings us back to Sun Tzu’s writings: "In war, there is nothing more important that espionage. None should be more liberally rewarded as spies. In no other business should greater secrecy be preserved. Spies cannot be usefully employed without a certain intuitive sagacity. They cannot be properly managed without benevolence and straightforwardness. Without subtle ingenuity of mind, one cannot make certain of the truth of their reports. Be subtle! be subtle! and use your spies for every kind of business."

I think you would agree that it would be naïve to assume China is not employing its secret services to further its own ends. It would also be foolish to think that all Chinese workers are only mere workers. Therefore, I would say that for now it is actually a good thing that the Baltic states have not come under China’s radar, because considering the greediness and susceptibility of people and China’s modus operandi, it wouldn’t take long until some political parties would begin chanting that Chinese communism isn’t Russian communism and that we need to expand cooperation with this nation. It is well known that China has mastered numerous ways of getting what it wants. As I said previously, this ranges from simple loans and grants to different types of investment.

And to stimulate the process, China invites influential people to different meeting in China, covers the transportation and accommodation costs and, of course, never forgets about gifts. Lithuanian intelligence services have also concluded that: “With growing Chinese economic and political ambitions in Lithuania and other NATO and EU member states, the activities of Chinese security services are becoming increasingly aggressive.” 12

We can now do a comparison of two countries. Just like Russia, China too has a single goal – to strengthen its geopolitical influence. Both countries have bloated ambitions, but when it comes to resources China is already far ahead of Russia. And, unlike the aggressive approach of Russia which only yields results in the short-term, China’s tactics are much more covert and deeper and the resources available to it are much greater. I will conclude my thoughts with another grain of wisdom from Sun Tzu: "He who lacks foresight and underestimates his enemy will surely be captured by him."

This op-ed is solely the opinion of the author and is not endorsed by EU Reporter.
1 http://epadomi.lv/interesanti_neparasti/vaiatceries/06122011-sun_dzi_kara_maksla
2 https://hbr.org/2020/02/how-much-money-does-the-world-owe-china
3 https://www.tvnet.lv/4514272/kinas-paradu-diplomatija-aizdod-milzu-naudu-un-iegust-politisku-ietekmi
4 https://www.visualcapitalist.com/global-chinese-financing-is-fueling-megaprojects/
5 https://www.tvnet.lv/4514272/kinas-paradu-diplomatija-aizdod-milzu-naudu-un-iegust-politisku-ietekmi
6 https://jauns.lv/raksts/arzemes/363011-baltkrievija-no-kinas-bankas-sanems-450-miljonu-eiro-aizdevumu
7 https://en.wikipedia.org/wiki/Belt_and_Road_Initiative
8 https://eng.yidaiyilu.gov.cn/zchj/qwfb/86739.htm
9 http://edzl.lv/lv/aktualitates/arhivs/zinas/kina-pauz-interesi-investet-dzelzcela-projekta-rail-baltica.html
10 https://www.la.lv/valsts-drosibas-dienests-uzrauga-kinas-investoru-aktivitates-latvija
11 https://www.lsm.lv/raksts/dzive--stils/vesture/padomju-laiku-viesstradnieki-mainija-latvijas-iedzivotaju-nacionalo-strukturu.a144614/
12 https://www.la.lv/lietuvas-izlukdienesti-bridina-par-kinas-spiegosanas-pastiprinasanos

Belgium

Commission approves €45 million Belgian scheme to support companies affected by the coronavirus outbreak

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The European Commission has approved a €45 million Belgian scheme to support companies active in the Brussels-Capital region affected by the coronavirus outbreak and the restrictive measures that the Belgian government had to implement to limit the spread of the virus. The public support was approved under the State Aid Temporary Framework. Under the scheme, which goes under the name 'la prime Relance', the aid will take the form of direct grants. Eligible beneficiaries are companies of all sizes active in the following sectors: nightclubs, restaurants and cafés (‘ReCa') and some of their suppliers, events, culture, tourism, sport and passenger transport. In order to be eligible, companies must have been registered in the Central Bank for Enterprises (‘la Banque-Carrefour des Enterprises' ) by 31 December 2020. The Commission found that the Belgian scheme is in line with the conditions set out in the Temporary Framework. In particular, the support (i) will not exceed €1.8 million per company; and (ii) will be granted no later than 31 December 2021.

The Commission concluded that the measure is necessary, appropriate and proportionate to remedy a serious disturbance in the economy of a member state, in line with Article 107(3)(b) TFEU and the conditions set out in the Temporary Framework. On this basis, the Commission approved the measure under EU state aid rules. More information on the Temporary Framework and other actions taken by the Commission to address the economic impact of the coronavirus pandemic can be found here. The non-confidential version of the decision will be made available under the case number SA.64775 in the state aid register on the Commission's competition website once any confidentiality issues have been resolved.

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European Commission

Macro-financial assistance: EU disburses €125 million to Bosnia and Herzegovina and €50 million to the Republic of Moldova

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The European Commission, on behalf of the EU, has carried out another round of disbursements under the €3 billion macro-financial assistance package for ten enlargement and neighbourhood partners. The programme is a concrete demonstration of the EU's solidarity with its partners to help respond to the economic impact of the COVID-19 pandemic. The Commission has disbursed €125 million to Bosnia and Herzegovina and €50 million to the Republic of Moldova. This support is provided through loans at very favourable rates. With these disbursements, the EU has successfully completed five out of the 10 MFA programmes in the €3 billion COVID-19 MFA package, and disbursed the first tranches to all partners. The Commission continues to work closely with the rest of its MFA partners on the timely implementation of the agreed policy programmes. 

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European Commission

NextGenerationEU: European Commission endorses Finland's €2.1 billion recovery and resilience plan

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The European Commission has adopted a positive assessment of Finland's recovery and resilience plan. This is an important step towards the EU disbursing €2.1 billion in grants to Finland under the Recovery and Resilience Facility (RRF). The financing provided by the RRF will support the implementation of the crucial investment and reform measures outlined in Finland's recovery and resilience plan. It will play a significant role in enabling Finland to emerge stronger from the COVID-19 pandemic.

The RRF is the key instrument at the heart of NextGenerationEU which will provide up to €800bn (in current prices) to support investments and reforms across the EU. The Finnish plan forms part of an unprecedented coordinated EU response to the COVID-19 crisis, to address common European challenges by embracing the green and digital transitions, to strengthen economic and social resilience and the cohesion of the Single Market.

The Commission assessed Finland's plan based on the criteria set out in the RRF Regulation. The Commission's analysis considered, in particular, whether the investments and reforms contained in Finland's plan support the green and digital transitions; contribute to effectively addressing challenges identified in the European Semester; and strengthen its growth potential, job creation and economic and social resilience.

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Securing Finland's green and digital transitions  

The Commission's assessment finds that Finland's plan devotes 50% of the plan's total allocation on measures that support climate objectives. Finland has announced an ambitious target for achieving carbon neutrality by 2035. The reforms and investments included in the plan will make an important contribution to Finland achieving this objective. The plan addresses each of the highest emitting sectors in turn, namely energy, housing, industry and transport. It includes reforms to phase out the use of coal in energy production, changes to taxation to favour cleaner technologies, and a reform of the Waste Act with increased targets for recycling and reuse. On the investment side, the plan will finance clean energy technologies and related infrastructure, industry decarbonisation, the replacement of oil boilers with low- or zero-carbon heating systems and private and public charging points for electric cars.

The Commission's assessment finds that Finland's plan devotes 27% of its total allocation on measures that support the digital transition. The plan includes measures to improve high-speed internet connectivity, particularly in rural areas, support the digitalisation of businesses and the public sector, enhance digital skills of the workforce and support the development of key technologies such as artificial intelligence, 6G and microelectronics.

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Reinforcing Finland's economic and social resilience

The Commission considers that Finland's plan includes an extensive set of mutually reinforcing reforms and investments that contribute to effectively addressing the economic and social challenges outlined in the country-specific recommendations addressed to Finland in recent years.

It contains a broad set of reform measures to raise the employment rate and strengthen the functioning of the labour market, ranging from the transformation of Public Employment Services to improving and facilitating access to social and healthcare services. The plan includes specific measures to provide integration support for young people and people with partial work-capacity. The plan also includes measures to strengthen the effective supervision and enforcement of Finland's anti-money laundering framework.

The plan represents a comprehensive and balanced response to the economic and social situation of Finland, thereby contributing appropriately to all six pillars referred to in the RRF Regulation.

Supporting flagship investment and reform projects

Finland's plan proposes projects in all seven European flagship areas. These are specific investment projects, which address issues that are common to all Member States in areas that create jobs and growth and are needed for the green and digital transition. For instance, Finland has proposed to provide €161 million to investments in new energy technologies and €60m toward the decarbonisation of industrial processes to support the green transition. To support the digital transition, the plan will invest €50m in the rollout of rapid broadband services and €93m to support the development of digital skills as part of continuous learning and labour market reforms.

The Commission's assessment finds that none of the measures included in the plan significantly harms the environment, in line with the requirements laid out in the RRF Regulation.

The Commission considers that the controls systems put in place by Finland are adequate to protect the financial interests of the Union. The plan provides sufficient details on how national authorities will prevent, detect and correct instances of conflict of interest, corruption and fraud relating to the use of funds.

Commission President Ursula von der Leyen said: “I am delighted to present the European Commission's endorsement of Finland's €2.1bn recovery and resilience plan. I am proud that NextGenerationEU will make a significant contribution to support Finland's goal to become carbon neutral by 2035. The plan will also help bolster Finland's reputation for excellence in innovation with support for the development of new technologies in areas such as artificial intelligence, 6G and microelectronics. We will stand with Finland throughout the plan's implementation to ensure that the reforms and investments it contains are fully delivered.”

An Economy that Works for People Executive Vice President Valdis Dombrovskis said: “The Commission has today given its green light for Finland's recovery and resilience plan, which will set the country on a greener and more digital path as it recovers from the crisis. This plan will help Finland to meet its ambitious carbon-neutrality target by 2035, with reforms and investments that will reduce carbon emissions from energy production, housing, industry and transport. We welcome its focus on high-speed connectivity, particularly for sparsely populated areas to help maintain their economic activity, and on digitalising smaller businesses and the public sector. With reforms to boost employment and strengthen the labour market, Finland's plan will promote smart, sustainable and inclusive growth once it is put into effect.”

Economy Commissioner Paolo Gentiloni said: “Finland's €2.1bn recovery and resilience plan is strongly focused on the green transition. No less than 50% of its total allocation is set to support climate objectives, helping to speed the country towards its ambitious target of carbon neutrality by 2035. The plan also contains an array of measures to boost Finland's already strong digital competitiveness. I particularly welcome the Finnish plan's strong social elements, with measures to raise the employment rate, tackle youth unemployment and facilitate access to social and healthcare services.”

Next steps

The Commission has today adopted a proposal for a decision to provide €2.1bn in grants to Finland under the RRF. The Council will now have, as a rule, four weeks to adopt the Commission's proposal.

The Council's approval of the plan would allow for the disbursement of €271m to Finland in pre-financing. This represents 13% of the total allocated amount for Finland.

The Commission will authorise further disbursements based on the satisfactory fulfilment of the milestones and targets outlined in the recovery and resilience plan, reflecting progress on the implementation of the investments and reforms. 

More information

Questions and Answers: European Commission endorses Finland's €2.1bn recovery and resilience plan

Factsheet on Finland's recovery and resilience plan

Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Finland

Annex to the Proposal for a Council Implementing Decision on the approval of the assessment of the recovery and resilience plan for Finland

Staff-working document accompanying the proposal for a Council Implementing Decision

Recovery and Resilience Facility

Recovery and Resilience Facility: Questions and Answers

Recovery and Resilience Facility Regulation

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