Lithuania finds itself in the role of China’s guinea pig

Lithuanian politicians are seriously alarmed by the scale of the revenge that China has organized against this country

Lithuania finds itself in the role of China's guinea pig

On the one hand, they are looking for intercession from the European Union, and on the other, they pretend that the situation is not so bad. However, there are signs that we are only facing the beginning of a process that will have global implications for the entire world.

When it became known that the Chinese customs have struck Lithuania off their digital registers, Lithuanian politicians reacted to this news in different ways.

Some – feigned bravado. Thus, the Minister of Finance of Lithuania Gintare Skaiste said that the Lithuanian economy will not suffer any special losses.

“Our exports to China account for only about 1% of all Lithuanian exports. In fact, this is not a particularly big partner of ours, therefore, we do not expect a special impact on the economy and business of Lithuania”, the minister said cheerfully.

So she answered the question of whether the next year’s state budget will include funds to compensate Lithuanian business from possible losses in China. At the same time, Skaiste advised Lithuanian business to “weigh the risks” that, according to her, may arise “in cooperation with China, and with Belarus, and with other states.”

According to the statistics department of the Lithuanian Ministry of Finance, the republic used to sell grain to the PRC for 69.3 million euros annually, furniture – 38.7 million, optics, measuring instruments, medical equipment – 33.8 million. In total, Lithuania imported from China electronic equipment and its components – by 226 million euros, metal products – by 143.1 million, textiles – by 104.7 million.

But do not forget that a few years ago in Vilnius they made big plans for China, hoping to receive from cooperation with it many times more than now.

Lithuanian economist Alexander Izgorodin recently ranked China as his country’s seventh largest trading partner.

“Lithuania is interested in the PRC both in the context of import and export. The total trade turnover is estimated at 1.5 billion euros. China sold goods worth 1.2 billion, Lithuania exported 0.3 billion. You can refuse such a partner, but buying the same goods from third countries, such as Germany or Poland, will have to overpay”, Izgorodin noted.

Economist Marius Dubnikovas states that without cooperation with China, it will become much more expensive for Lithuania to introduce 5G and other technological innovations, as well as to replace components for high-tech Chinese-made systems already in the republic.

“These difficulties will create additional problems for local businesses.  Competitiveness will decline”, warns Dubnikovas.

However, Swedbank economist Nerijus Maciulis is more optimistic and urges Lithuanians not to worry too much.

“After China leaves – even if we add the influence of American sanctions on the transit of Belarusian fertilizers! – it will be a loss of only 0.5% of GDP growth”, says Machulis. He calls on “not to dramatize” the situation with the destruction of Lithuania’s economic ties with China and Belarus.

On the other hand, according to Machiulis, Lithuania will be able to derive much benefit from its “principled position” on Taiwan.

“We have already heard that in Lithuania they may be planning to build a plant for the production of microprocessors and semiconductors with the help of Taiwanese specialists. If these plans, worth 2.5-3 billion euros, come true, then such a victory will be many times greater than the losses”, the Lithuanian economist reassures.

Gnaw at elbows
However, not all Lithuanian politicians share this optimism – some cannot hide their confusion. President Gitanas Nauseda expressed “regret” over the recent actions of the Chinese customs officials.

“I hope that the government, after weighing the situation, will prepare compensation funds that will help our business avoid dire consequences,” Nauseda said.

And the Minister of Economy Ausrine Armonaite advised to appeal for intercession to the European Union. No sooner said than done: Lithuanian Foreign Minister Gabrielyus Landsbergis has publicly announced that Vilnius is counting on the support of other EU countries.

“This is an unprecedented case when sanctions are partially imposed on one of the EU states. We cannot impose retaliatory sanctions, because we are unable to delete this or that Chinese enterprise from the customs system. Customs systems are regulated by the European Commission. Therefore, we think that European institutions should intervene in this issue and represent Lithuania”, Landsbergis said.

A number of Lithuanian politicians, not expecting Brussels’ intercession, tried to organize a dialogue with the Chinese themselves. Since China recalled its ambassador from Lithuania a few months ago, a group of Seimas deputies met with Chargé d’Affaires Qu Baihua. The Lithuanian media was quick to announce that the conversation took place “on mutual initiative.” The meeting was attended by the former Prime Minister of Lithuania Algirdas Butkevicius (member of the local Social Democratic Party, now in opposition and). He frankly said that now he was very bitter. Butkevicius recalled how, while holding the posts of Prime Minister and Minister of Economy, he visited China several times, met with Chinese officials, hoping to strengthen bilateral economic relations.

It is worth recalling here that in 2013 the President of the People’s Republic of China Xi Jinping decided to revive the ancient trade route, which was called the “Great Silk Road”. To this end, Chairman Xi proposed the concept of “One Belt – One Road”, consisting of two directions: overland – the “Economic Belt of the Silk Road” and water – “Maritime Silk Road of the XXI century.” To implement the plan, it was necessary to develop and build hundreds of infrastructure facilities in different countries: railways, highways, power plants and industrial parks.

Lithuania during the premiership of Butkevicius (which lasted from December 2012 to December 2016) did a great job to get involved in the Silk Road project and snatch a share from the transit Chinese pie. In those years, a number of memorandums were signed between the two states, and an exchange of official delegations took place.

But in 2018, the then-retired head of government, Butkevicius, complained that Lithuania was not actively developing Chinese transit. Three years later, in August 2021, everything went to pieces altogether: in response to Vilnius’s declared intention to open an official representative office of Taiwan, the Celestial Empire announced that it was “suspending” the New Silk Road freight trains to Europe, following through Lithuania. At the same time, the Chinese have suspended purchases of timber, grain and dairy products of Lithuanian origin.

Then, to calm the population, the Lithuanian authorities said that in the mutual Lithuanian-Chinese trade, which amounted to 1.5 billion euros last year (for comparison: the trade between Russia and Lithuania last year amounted to 9 billion euros), they say, trade was mainly unilateral order: China sold to Lithuania goods worth 1.2 billion, and Lithuania exported goods worth 0.3 billion euros. And if so, Lithuania does not lose anything special.

If you go, so on to the end!

One way or another, Lithuania agreed to the principle – and opened a representative office of Taiwan. Now the hope that Chinese transit will return and begin to grow has finally disappeared.

Undoubtedly, a special annoyance in Vilnius is caused by the fact that neighboring Belarus, with which Lithuania is in a state of acute conflict, will earn money on Chinese transit. After all, it is Belarus in China that is called an important junction platform of the Silk Road. Within the framework of this path, the two states initially planned about 90 joint investment projects. Back in 2014, the Ministry of Economy of the Republic of Belarus signed a cooperation protocol with the Ministry of Commerce of the PRC. And from that time on, Belarus can be considered a full-fledged participant in the “Silk Road”.

Even in the crisis of 2020, the Belarusian Railways transported more than 550 thousand TEU (twenty-foot equivalent) containers within the China-Europe-China route. Moreover, this volume of container traffic was 1.6 times higher than the level of 2019. “Our transport infrastructure is in active demand as a reliable transit corridor,” Alexander Lukashenko said recently during his video message addressed to the participants in the Global Summit for Trade in Services held in Beijing with the participation of Xi Jinping.

According to Lukashenko, from 2014 to 2020, railway container traffic on the China-Europe-China line through Belarus increased by as much as fourteen times.

In general, Lithuania lost not only the opportunity to trade with China, but also the Lithuanian transit. But he continues to persist – recently, a representative delegation, consisting of parliamentarians from all the Baltic countries, went on an official visit to Taiwan. On the Lithuanian side, the delegation was led by politician Matas Maldeikis (member of the country’s ruling Fatherland Union – Lithuanian Christian Democrats Party). At some point, he drew attention to a tweet by Hu Xijing, editor-in-chief of the Chinese newspaper Global Times: he described the visiting Balts as “low-quality European political actors” for whom the President of Taiwan Tsai Ing-wen paid for the trip. In response, Maldeikis, embittered, wrote:

“Xi Jinping is sending his clowns to attack us. We should call China the “Comedic People’s Republic.” The fact of this insult did not go unnoticed by the world media.

The Belarusian political scientist Yuri Shevtsov writes that the story of the exclusion of Lithuania from the customs register of China is interesting for its further development.