BANJA LUKA, Bosnia-Herzegovina — Faced with growing economic pressure over looming debt payments and a lack of foreign investment, Bosnian Serb leader Milorad Dodik is seeking a financial lifeline from China.
His administration in Republika Srpska — Bosnia-Herzegovina’s predominantly Serbian entity — has recently inked new construction deals with Chinese companies, forged closer links between Dodik’s ruling Alliance of Independent Social Democrats (SNSD) party and China, and in April sent Prime Minister Radovan Viskovic to Beijing to meet with local companies and court investment.
“We are too small to be able to influence the development of any world policies and events, but at this moment we are looking for friends and partners who can help in commercial, economic, financial, and any other area,” Bosko Jugovic, the mayor of Pale in Republika Srpska, told RFE/RL’s Balkan Service after being part of a SNSD delegation that welcomed visiting Chinese trade officials to Sarajevo in late April.
Analysts say the warming ties between Republika Srpska and China — which were formalized through a cooperation agreement in 2016 — are part of a wider political play by Dodik as he grapples with a struggling financial outlook and deteriorating relations with the West over his calls for the Serbian entity to secede from Bosnia and eventually form a union with neighboring Serbia.
In particular, Dodik is hoping to borrow from Chinese financial institutions and get China to accept bonds leveraged by Republika Srpska so that it can meet a series of debt payments to Western lenders that start coming due this summer.
Dodik said in late March that Chinese institutions had agreed to accept the bonds as financial guarantees that they will be repaid for any loans, but many economic analysts are still unsure about the Bosnian Serb leader’s plan, which they say lacks bargaining power and could lead to unfavorable terms.
“Securing a loan from China is one thing, but the question is under what conditions,” Velizar Antic, an independent political analyst from Banja Luka, told RFE/RL. “It’s about when and how those loans will be repaid [and] what happens if Republika Srpska can’t repay them.”
Balancing Finance And Politics
Once a favorite of the West, Dodik — who has been a key figure in Bosnian politics for 30 years — is no stranger to playing his warm ties with Beijing and Moscow off Europe and the United States.
When he was elected president of Republika Srpska in 2022 after finishing his tenure as the Serbian representative of Bosnia’s tripartite presidency, he vowed to forge ahead with his close relations with the Kremlin and said that any sanctions or cuts to European Union funding would only force him to take up offers of investment from China.
The nationalist politician appears to have made good on that pledge, announcing recently that he plans to visit Russian President Vladimir Putin in Moscow on May 23 despite international condemnation over Russia’s unprovoked, full-scale invasion of Ukraine and Western calls to isolate the Kremlin.
“When I go to Putin there are no requests. He just says, ‘What is it I can help with?’ Whatever I discussed with him, I’ve never been cheated on it. I don’t know what else to base trust upon, if not that,” Dodik told The Guardian newspaper in 2021. “With [Chinese leader] Xi Jinping, he also says, ‘if there is anything I can help with, I am there.'”
How this will translate into Dodik’s current efforts to meet Republika Srpska’s looming debt payments remains to be seen.
Republika Srpska’s Finance Ministry did not respond to RFE/RL’s requests for comment about its debt payments and potential Chinese loans.
Looking ahead, a 200 million-euro ($217 million) installment for bonds sold on the Vienna Stock Exchange five years ago is due in June and the Republika Srpska — which has a population of 1.3 million people — will need to repay more than 500 million euros ($544 million) that it borrowed from various financial institutions by the end of 2023.
According to Bosnia’s Finance and Treasury Ministry, the external debt of Republika Srpska currently exceeds 2.1 billion euros ($2.29 billion).
During his trip to Beijing in April, Viskovic reportedly held talks with three Chinese lending institutions. The outcome of those talks is unknown, but Republika Srpska said that Chinese representatives would continue negotiations in Banja Luka, the entity’s de facto capital.
Several commentators have noted that the lack of specifics about ongoing talks with the Chinese side highlight that Bosnian Serb officials may not be satisfied with the terms they have been offered.
Igor Crnadak, vice president of the opposition Party of Democratic Progress, told RFE/RL that governing officials have not been clear on the repayment schedule for its debt or about any talks with Chinese institutions, adding that his party was planning to call for a special parliamentary session to get information regarding the entity’s finances.
“The situation is quite serious, especially considering the clauses in the contracts, which state that the holders of those bonds can enter into ownership of companies where the government has a majority stake, if the debt is not repaid,” Crnadak said.
Leaning More On Moscow, Beijing
The financial pressure Republika Srpska is facing is in part due to allegations of misspending and corruption that have followed successive governments, but also because of Dodik’s dramatic falling out with the West, which has limited his funding options.
Since 2017 Dodik has been banned from traveling to the United States or accessing assets under its jurisdiction after he defied Bosnia’s Constitutional Court by staging a referendum on the celebration of Republika Srpska Day, marking the date in 1992 when Bosnian Serbs declared their own state.
Separatist ambitions among ethnic Serbs sparked Bosnia’s devastating 1992-95 war, which killed more than 100,000 people, displaced millions, and shattered much of the country.
A U.S.-brokered peace agreement ended the war and created the predominantly Serb and Bosniak-Croat entities that make up the Federation of Bosnia-Herzegovina. Bosnia’s three-member presidency is held by representatives of those three main ethnic groups.
Dodik’s pro-Russian stance is well-known, but the turn toward Beijing has coincided with China’s own close relationship with Serbia — who is Republika Srpska’s main ally and largest trading partner — and the prospect of securing Chinese loans and investment with fewer strings attached than Western options.
In February, a consortium of Chinese companies sealed a 175 million-euro ($190 million) loan deal with Republika Srpska for the construction of part of a northern highway connecting the region with Serbia.
Viskovic provided few details about the bid and loan at the time of the announcement, saying only that China Overseas Engineering Group was chosen because it was the most favorable bidder after the European Bank for Reconstruction and Development withdrew its support, saying the project was not vital. Beyond that, Viskovic said the 15-year loan will have a three-year grace period for repayment.
In August 2022, another highway construction deal was signed with China State Construction Engineering to build a separate 33-kilometer-long section of the same highway in northern Bosnia.
Following the announcement of the 302 million-euro ($328 million) agreement, Dodik touted the contract as a win for his strategy of courting Chinese capital in the face of Western pressure.
“This shows that Republika Srpska has an alternative and cannot be blackmailed by some from the West who try to influence political attitudes and political solutions by banning banks from investing money,” he said.
