Lithuania is a small country by the Baltic Sea. It has almost 3 million inhabitants and a GDP of 56 billion euros. However, despite being “just” another country among the dozens of countries with more political weight in the international sphere, Lithuania has presented a political and diplomatic pulse to a country of 1400 million inhabitants and a GDP of 14 trillion dollars: China. After abandoning the regional initiative of collaboration with China, the 17+1, Lithuania accepted the opening of a Taiwanese office on its soil using this official name instead of Taipei. This, taken by China as an attack on its One China policy, has led to a negative outlook on relations between the two countries in which even the EU and the US have already been involved.
The End of One China Policy in Lithuania?
The relations between the two countries were friendly, since Lithuania saw in China, like many other countries, a large market where to place part of its products or a country from which to receive investments. However, as of 2019, Lithuania changed its view regarding China with the inclusion of the Asian country within the list of threats to the Baltic country according to the Lithuanian Security Department report. Mainly, the security services were concerned about Chinese investments in sensitive infrastructures for the country, especially ports, as well as espionage and counterintelligence activities (Goble, 2019). This concern was shared by the still current Lithuanian president, Gitanas Nauseda, who spoke out against Chinese investments to develop Lithuanian ports (Kishinevsky, 2021).
Lithuania, together with the rest of its regional partners from the Baltic countries to the Balkans (CEE region), was part of the 16+1 Initiative, extended in 2019 to 17+1 with the addition of Greece. This regional initiative between the countries of the region and China was based on flexibility, without permanent bodies and annual meetings, designed to introduce Chinese capital into the region while promoting the region’s markets and products in the Asian country.
However, in 2020 Lithuania was among the 6 EU countries that during the annual meeting of 17+1 chaired for the first time by Chinese President Xi Jing Ping —instead of his number two, Li Keqiang (Martino, 2021)— decided to downgrade its representation to a diplomatic and ministerial level, same as the Baltic states, Bulgaria, Romania and Slovenia (Kobierski, 2021). As if that were not enough, in May 2021, Lithuania decided to become the first country to abandon the initiative, justifying its decision with the poor results achieved by the project, as well as due to the shift in its foreign policy based on the defence of democracy and human rights.
Moreover, they considered that the project was divisive for Europe and that the relationship with China should be negotiated in a 27+1 format, i.e. the EU and China on an equal footing. At the same time and aligned with its concern for human rights and their situation in China, the Lithuanian parliament passed a resolution with 3/5 of the parliament in favour to consider the situation of the Uyghur minority in China as a „genocide“ as well as to proceed to request the European Commission to change its relations with Beijing. In addition, they also called for the withdrawal of the national security law in Hong Kong as well as the start of negotiations with the Dali Lama to resolve the situation in Tibet (Sytas, 2021). This resolution follows the anti-China foreign policy of the US, UK, and Canada, which have already defined the Uyghur situation as genocide. In the meantime, the Chinese Foreign Ministry spokesman indicated that China was opposed to these moves and that Lithuania should correct its mistakes in order not to damage its relations (Sytas, 2021).
At the same time, Lithuanian army intelligence indicated that Huawei’s involvement in the development of the country’s 5G infrastructure was a threat to the country’s security. Moreover, back in September, the Lithuanian Ministry of Defence accused Huawei, Xiaomi and OnePlus of being a cybersecurity risk. These accusations are not new, even among other countries in the area, which in the context of the Three Seas Initiative have supported the move away from Chinese technologies as they are considered a „danger“ and called for an Atlantic solution between Europe and the US for the development of these networks (Kishinevsky, 2021).
Finally, in September -and this is where the relationship with China finally exploded- Lithuania announced the opening of an official Taiwanese representation in the country. In addition, the Baltic country led a resolution in the European Parliament to increase cooperation with Taiwan, which was praised by the EU Parliament and U.S. Congress and State Department (Kishnevsky, 2021).
In response, China halted all direct freight trains, restricted Lithuanian agricultural imports and eventually downgraded its representation to the chargé d’affaires level (Wu, Chen, 2022), while Lithuania and its producer confederations indicated that China had removed the Baltic country from its customs declaration system since the beginning of December, thus preventing the export of products from Lithuanian ports to China (LRT, 2021). This not only affected Lithuanian products but all products exiting through its ports and therefore affecting other countries such as Germany too. In addition, Chinese exports to German companies operating in Lithuania have also been affected by this blockade (Miller, Chazan, Bounds, 2021).
Because of this situation, the EU is preparing a case against China at the World Trade Organisation (WTO) which may take months, especially in an organisation that is already in a state of paralysis. China, for its part, has denied the situation and in fact readmitted Lithuania to its systems for a few days (Bermingham, 2021), although it later disappeared again. However, despite refusing having taken these actions, they seem to have advised the EU that „private logistics companies and importers might be avoiding Lithuanian goods in anger over its links with Taiwan“ (Miller, Chazan, Bounds, 2021). French and Swedish companies are facing the same problems (Lau, Moens, 2021).
Meanwhile, Lithuania is seeking support within the European Union. However, as the larger countries are dependent on their trades with China, they are not interested in a full-scale confrontation, preferring to settle it as discreetly and diplomatically as possible. At the institutional level, EU Trade Commissioner, latvian Valdis Dombrovskis, has explicitly supported Lithuania and has advocated starting an investigation to determine if the Chinese measures are in line with WTO rules. Despite this, the European trade rules or trade defence instruments do not cover the areas against which China is targeting Lithuania. Moreover, in the absence of a bilateral trade agreement with the EU, there is no way to specify measures to ease the tension with China. Dombrovskis will soon announce a plan to create an instrument against trade coercion, which will allow the EU to hit back at other countries through measures on services, goods, or intellectual property rights. However, it will take years of discussion in the European institutions for these tools to come to fruition. The WTO option, on the other hand, is difficult and will also take years, so the EU’s options are very limited (Lau, Moens, 2021).
Lithuania Wants the US Protecting its Back
Lithuania has justified this shift in its relations with China due to its new foreign policy perspective, which is now more focused on their duty to defend human rights and democracy throughout the world, an idea arising due to its past under the Soviet government. In this way, Lithuania has shown a great willingness to support what they believe is closer to their ideas of democracy, not only in China but also in Belarus. However, behind this supposedly noble policy lie purely geopolitical interests, as they do not seem very concerned about the situation in Western allies such as Turkey, Azerbaijan, or Saudi Arabia.
In the Belarusian case, Lithuania maintains an interest in the region due to its past as a ruler of the area during the Duchy of Lithuania, as well as an interest in a shift from being a close Russian to a Western one, in order to have the “Russian threat” as far as possible. In the case of the dispute between China and Taiwan, Lithuania is trying to make the US see that it is a faithful ally in the global competition for geopolitical hegemony, in hopes that the US does not make a complete turn towards Asia-Pacific, leaving the Russian front unguarded. Lithuania knows that the European defence depends exclusively on the US and that it cannot fully rely on other countries in the region but perhaps in the UK —a loyal American ally and geopolitically Russophobic— and Poland —as it is currently happening in the new Russian-Ukrainian crisis. In this way, without being asked to do so by the White House, Lithuania is volunteering against China at the international level and against Russia at the regional level.
In fact, this is seen from the American political sphere, which passed a resolution in the Senate last November 5 in favour of the Lithuanian policy towards Taiwan. Therefore, the new Lithuanian government formed by three centre-right parties in October 2020 intends to keep the attention of the US on the country’s dispute against Russia. In just a few months, they have destroyed the relations created by the former liberal and social-democratic governments, which looked to China to make up for the ban on European food imports to Russia in 2014 (Kishinevsky, 2021). Neither the left-wing parties nor the Lithuanian president himself approves of the country’s new policy towards China. In fact, Nauseda, even though the Lithuanian president oversees the country’s foreign policy and represents Lithuania at EU summits (Seputyte, 2022), has stated that allowing Taiwan to use its official name was a mistake that damaged the relations with China.
Another important reason why Lithuania has dared to take this step is that, unlike other EU countries, they are not highly dependent on their trade relations with China. Only 1.1% of Lithuanian exports in 2020 went to the Asian country, while imports were slightly higher in proportion, being relatively easy for them to find substitutes (Latschan, 2021). It is because of this low trade union that Lithuania has definitely decided to leave the 17+1 Initiative, advocating for the rest of the EU countries in it to do the same and move to treat relations with China from a fully European perspective, what they call „27+1“. However, the situation has escalated beyond what was foreseen by Vilnius (Bohman, 2022), affecting not only the trade between the two countries but also everything else transported to or from Lithuania. This has caused foreign companies operating out of Lithuania to reconsider staying in the country as their supplies and products are blocked from being transported between China and the Baltic country (Bohman, 2022).
Meanwhile, from Taiwan, in a short time and influenced by the gratitude of having the opportunity to open the first office with its official name on European soil in decades, Lithuania has appeared on the commercial map of Taiwanese companies and individuals. Taiwan has announced a $200 million investment plan to help ease the Lithuanian trade war and together with another $1 billion plan, Taiwan intends to lend a helping hand to its new European ally.
However, the numbers are not high, so it remains to be seen how much Lithuania will benefit from this situation. At the same time, the possibility of Lithuania becoming a strategic ally for Taiwan is being explored, including the possibility of opening a microchip factory to ease the congestion in Taiwanese factories, although it is not yet clear that Lithuania has the economic or natural resources to replicate the Taiwanese model based on owning the entire supply chain for in-country production (Lau, Cerulus, 2022). Lithuania does not have plans to escalate the problem by recognizing Taiwan as an independent country for the moment, as there are only 16 countries worldwide that do it, and none of them are its allies.
Despite the problems that China’s removal of Lithuania from its customs declaration system has caused for Lithuania, it seems that for the time being it is not enough for them to change its policy towards China and Taiwan. The anti-China policy combines historical anti-communist and anti-dictatorial perceptions with the desire to protect itself from Russia with the help of the US, as the Lithuanian policy is also fully aligned with US interests in Europe and Asia. At the same time, it provides leadership in the Central and Eastern European region, as well as in the Three Seas Initiative, by spearheading against China and in favour of Taiwan, while working to defend the region from possible Russian attacks.
In addition, Lithuania is the European country most in favour of expanding relations with Taiwan and forming a united front against China, again in the interests of the US. However, it remains to be seen how long it will be able to hold out if it does not receive support from the major EU countries. Moreover, if the US decides that it needs Russia as a neutral or even as an ally against Chinese power, Lithuania may have invested a lot of effort against a country that its main ally needs. Finally, we will still have to wait for possible Chinese reactions in the medium term and to see how far the tension with Lithuania may escalate. If the difficulties in transporting goods between the two countries continue for a long time, it may cause foreign companies to reconsider using Lithuania as a hub between the two countries, with the economic damage that this would entail for Lithuania.
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Written by Óscar Méndez