Stucked between domestic corruption and Western pressure: Can China take over Croatia's shipyards?

Croatia's PM Andrej Plenković and Chinese Premier Li Keqiang (photo: Jason Lee / Reuters)

In mid-April, the Croatian city of Dubrovnik hosted the 16+1 summit, a Chinese initiative to strengthen business ties between China and 16 countries from Central and Eastern Europe. Held under the slogan "Building Bridges of Openness, Innovation and Partnership," the summit began with a business forum that welcomed around 600 people, including representatives from six countries of the Balkan region: Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Romania and Serbia. Chinese Premier Li Keqiang arrived in Croatia with a team of 250 people and during the first day of his visit in Zagreb, he met Croatia's Prime Minister Andrej Plenković, Parliament Speaker Gordan Jandroković and President Kolinda Grabar-Kitarović.

Li was the first Chinese premier to visit Croatia since the two countries established diplomatic ties in 1992. A day later, Plenković hosted a ceremonial dinner for heads of delegation in Dubrovnik, formally launching the summit. In a joint statement issued during the official visit, China and Croatia agreed to expand collaboration within the framework of the Belt and Road Initiative (BRI). Chinese-Croatian cooperation already covers a number of fields including construction, harbours, railways, sports and education. Ahead of the summit, two prime ministers visited the construction site of the Pelješac Bridge and marked the completion of the first phase of construction. The most prominent symbol of Croatian-Chinese cooperation, the cable-stayed bridge is designed to connect the Croatian mainland with its southernmost region around Dubrovnik, while avoiding crossing Bosnian territory. It will be 2,400 meters long and 55 meters high.

The Croatian and Chinese side highly praised each other in official statements. "Over the past 27 years, China and Croatia have treated each other with respect and as equals," Li said in a signed article published prior to his visit. "The political trust and friendship between the two countries have deepened, bilateral cooperation has yielded fruitful outcomes, and economic and trade ties have grown from strength to strength," he added. During his talks with Plenković, Li said China stands ready to work with Croatia to carry on their friendship, explore new dimensions in bilateral relations, and lift mutually beneficial cooperation to a new level. In her meeting with Li, Grabar-Kitarović noted that "Croatia and China share a profound traditional friendship and amicable bilateral relations, and have broad prospects for cooperation in areas including economy and trade, investment and culture." In the eyes of Jandroković, Li's visit is" a trip of friendship and cooperation, and China is Croatia's great partner as well as a friend during the country's development."

Behind the sweetheart statements about deepening cooperation and developing friendship, common for all bilateral meetings, negotiations on Croatian-Chinese practical cooperation were focused primarily on the Croatia's indebted shipyards. The Croatian government has delayed reaching a decision on the future of the heavily indebted Uljanik and Treći Maj shipyard for many months, hesitating between the options of restructuring or declaring bankruptcy. The Uljanik company owns both the shipyard of the same name in Pula, and Treći Maj in Rijeka. An intense struggle for the survival of the heavily indebted company started in 2018. The government loaned the firm 96 million euros, but subsequent attempts to agree another round of financing have failed. Company shipyard workers went on strike last August after not receiving their salaries for previous month. The government eventually ensured their salaries for two months, but they went on strike again in March, having gone for another seventh months without salaries. In late March, twelve former executives of Uljanik shipyard were arrested on suspicion of abuse of trust in economic transactions and of one count of subsidy fraud, estimated to have cost the state budget and the shipyard some 167 million euros.

Negotiations between the two prime ministers have obviously resulted in some fruit, because a few days after their meeting, excited Plenković appeared on on Croatian state television (HRT) and said: "I have one fresh news and exclusive piece of news for you; Chinese friends just told us that the president of China Shipbuilding Industry Corporation (CSIC), the man contacted by Chinese Prime Minister Li Keqiang, will visit Pula and Rijeka and see what can be done in their eventual engagement or cooperation." Darko Horvat, the Croatian Minister of Economy, further confirmed that a delegation from the world's largest shipbuilding industry will visit the Uljanik and Treći Maj shipyards. Finally, during late April and early May, the CSIC delegation led by chairman Hu Wenming indeed visited two shipyards and negotiated with Croatian administration, obviously about take over since no other form of cooperation is possible. On 11 May, Horvat told the media that there is still no information about Chinese decision and specific intentions, but "news from China will arrive the following days."

The outcome is hardly predictable. In the context of international market, there is no chance that corrupt dwarves like Uljanik can compete with giants of China, Japan, and South Korea. Even South Korean giants like Hyundai have experienced strikes last year due to the long term reductions in productivity, caused by the growing quality of Chinese shipyards. Several decades ago, South Korea took over the primacy in shipbuilding at the expense of Europe, but today it is threatened by the fate of European shipyards, including Uljanik. On the other hand, Uljanik has experience with the construction of cruise ships, as well as a number of active European shipyards, but China hasn't. Other reasons for optimism include mutual positive experiences with the construction of Pelješac Bridge, the possible Chinese desire to acquire the first European shipyard and thus gain ground in the EU, and a proven will of the Croatian government to help the company in difficult times. Mutual interest, however, does not exclude the third factor, namely pressures from Washington and Brussels. The US directives have already effectively halted shipbuilding arrangements for the Iranian Navy and the connection to the Russian gas pipeline network.

Marko Knežević

Marko Knežević is a historian and freelance journalist from Bar, Montenegro. He is a frequent traveller to the Middle East and East Asia.