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Tiny Montenegro becomes the first EU country to fall into the Chinese Debt Trap

China has slowly extended its debt-trap diplomacy (Photo: IANS)

A tiny European country Montenegro is caught in Chinese debt trap.

It has been knocking the door of the European Union but the EU has turned its back, saying  it cant help in repayment of loan. The small Balkan republic had taken a one billion euro loan from China in 2014 to build the first phase of the highway linking the port of Bar on Montenegro’s Adriatic coast to landlocked neighbour Serbia.

The first instalment on the loan from China's state bank is due this month but the Montenegro government, whose debt is more than double its GDP because of the project, said that it won't be able to pay back such a large amount in one go, reports The Daily Mail

Citing the loan contract, the daily says that if Montenegro is not able to repay China's state-owned Export-Import Bank on time, the bank then has the right to seize land inside Montenegro, as long as it doesn't belong to the military or is used for diplomatic purposes.

The loan was used to pay for the construction of part of a highway to neighboring Serbia. Although the road, which is also being built by a Beijing-owned company, is years behind schedule, China’s state development bank isn’t offering Montenegro a break on its repayment.

Country’s Deputy Prime Minister Abazovic blames the previous government which agrees to the Chinese terms for a Chinese court of arbitration to have the final say on any contractual disputes.  

Read More: Lithuania quits China's Eastern Europe block, urges others to do the same

“This is not normal, this out of any kind of logic of national interest”, the Daily Mail quoted him saying. 

Montenegro had plans to build this highway but European banks weren't interested in lending the money because they didn't believe they'd be paid back. 

The mountainous nation of a population of 600,000, is a member of NATO and is trying to get into the European Union (EU). That makes the country an especially valuable target, despite its small size, since China gains when it has ways to pressure countries that are part of Western institutions. One of China’s main focus is to control significant elements of Europe’s infrastructure, such as railways and ports. 

According to the report, Montenegro is the first country in Europe to find itself in this position with what has been dubbed 'the highway to nowhere.'

For years, Beijing has been extending  its economic reach under the ambitious Belt and Road Initiative (BRI) and poor countries across Asia and Africa have seized on attractive Chinese loans and the promise of transformative infrastructure projects.

But the scheme has been criticised as an attempt by China to engage in neo-imperialism through 'debt trap diplomacy' as 'mob' style tactics. 

Read More: China's prestigious Fudan University faces opposition in Hungary