Monday, July 22, 2024

 

BALKAN BLOG: Serbia signals its geopolitical alignment with EU lithium deal

BALKAN BLOG: Serbia signals its geopolitical alignment with EU lithium deal
German Chancellor Olaf Scholz and European Commissioner Maros Sefcovic alongside Serbian President Aleksandar Vucic during their visit to Belgrade on July 19, when they secured access to lithium, a critical material for the green transition. / bundeskanzler.de
By Tatyana Kekic in Belgrade July 20, 2024

Serbia is back in the EU’s good books. Thanks to the country’s large lithium reserves, EU politicians have been trying to woo the Balkan state, repeating a mantra which verges on possessive: “Serbia belongs to the EU”. And Serbia is reciprocating. Rather than the usual carping, Serbia’s President Aleksandar Vucic is singing Europe’s praises and pledging loyalty to Brussels.

German Chancellor Olaf Scholz went on the diplomatic offensive on July 19, making a rare visit to Serbia’s capital, Belgrade. There, along with European Commissioner Maros Sefcovic, Scholz signed a memorandum of understanding with Serbia on a strategic partnership in raw materials, namely lithium. This will guarantee the EU access to the critical mineral used in mobile batteries and electric vehicles (EVs), which is crucial for the EU’s green transition, and also for Germany’s car industry.

The agreement is historic, and a clear demonstration of where Serbia’s loyalties lie. At a time when the country is being courted by China, Russia and the Gulf States, Serbia is promising its lithium reserves to Europe, and it has chosen an Anglo-Australian company, Rio Tinto, to open the mine. According to the Financial Times, when Chinese carmakers showed interest in Serbia’s lithium, they were basically told to jog on: “We are loyal to Europe,” said Vucic.

Some may say that this is just rhetoric, the usual posturing that disguises real loyalties to Russia or China, and is no indication that Serbia is pivoting Westwards. But if we look at the past two decades and more, since the fall of Slobodan Milosevic in 2000, Serbia’s fundamental orientation has always been to Europe. The new government has reaffirmed this, and by signing an agreement on lithium it has made actions speak louder than words.

Serbia’s alignment with the EU makes economic sense. In terms of cumulative foreign direct investment (FDI) and external trade, the EU is Serbia’s most important economic partner by far. FDI coming from the EU accounted for more than 59% of total inflows from 2010 until 2022. In terms of the value of goods, in 2022 Germany had twice the volume of trade with Serbia as any other foreign trade partner. This increased by a further 13% in 2023, reaching a record €9bn.

China is certainly catching up. In 2023 it was the largest single-country investor in Serbia, accounting for more than a third of total annual FDI inflows, and it recently signed a free trade deal with Serbia. But in January to May this year, the EU remained Serbia’s largest trading partner, accounting for 60.3% of the total exchange. Russia, often pegged as Serbia’s main patron, has a relatively minor presence in terms of the economy. Apart from its monopoly on natural gas and crude oil supplies (which Serbia is trying to diversify), Serbia’s trade with Russia is limited.

Despite its close ties with the EU, Serbia has struggled to shake off the view, prominent in the Anglophone world, that it is some kind of Russian proxy. Historically, Serbia has had close relations with Russia and Moscow remains an important political ally by exercising its UN security council vote to support Serbia’s claim to sovereignty over Kosovo. However, for well over a decade Serbia has deliberately pursued a foreign policy that does not privilege any one power. Instead it has chosen to pursue a balancing foreign policy and cultivated relations with other important players, including the EU, the US, China, Turkey and the UAE.

Attaining EU membership remains a priority for Serbia’s foreign policy, but long delays in the accession process have encouraged the Western Balkan country to build external economic ties wherever it can to grow the economy. As Serbia’s national bank governor, Jorgovanka Tabakovic, said recently, instead of waiting around at the EU’s door, Serbia has “dared to have its own path and to be different”.

For a small country in the borderlands between East and West, it makes sense to keep all options open. And Serbia has a history to draw upon: Belgrade was once at the centre of non-aligned Yugoslavia, which sought to maintain autonomy and refused to be drawn into the conflict between East and West during the Cold War.

The lithium deal, among other things, demonstrates that Serbia remains wedded to the EU, even as it seeks to maintain good relations with other powers. Who knows, the deal could even give new impetus to Serbia’s accession negotiations with the EU, which have been on hold for some time.  


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