Enter the dragon

Will China’s strategic interest in central Europe give Poland the geopolitical importance it has always lacked?
World leaders in Warsaw: Chinese President Xi Jinping visited Poland and met with President Andrzej Duda.

Among the key shortcomings of Poland’s foreign relations is its inability to adequately leverage its position between the West, which it aspires to, and the East, which it fears. Major capitals of the West are well aware that its more-or-less justified fear of Russia will compel Poland, lacking any strategic alternatives, to accept whatever the West offers, without major complaints. Repercussions of Poland’s relatively weak negotiating position include its inability to secure any meaningful aid from the US to bolster its security, despite political guarantees stemming from its NATO membership and its eager participation in American expeditionary missions. Radosław Sikorski, Minister of Foreign Affairs in the previous government, was caught privately summarising this state of affairs in no uncertain terms. The government has of course changed since then. But everyone in Poland from the left to the right is well aware that attempting to leverage its North Atlantic relationship by over-playing its position vis-à-vis Russia would be playing with fire.

Economy above all

Recently, however, a completely new player to the east has loomed on the horizon. Accepting him at the table could turn Poland’s international relationship matrix upside down, unchanged as it has been since 1989. This new player is China. A situation in which China and the West bid for Poland’s favour would entirely redefine its negotiating position and create conditions for the country to become a more significant player on the international scene despite being a relative economic and military lightweight.

Due to China’s long-term and increasing trade advantage over the US, the main area where both countries strive for influence is not military rivalry (for example in the South China Sea) but global trade and the promotion of settlements in their own currencies. Both the US and China are lobbying for Poland to take part in their strategic projects aimed at building a trade advantage over their biggest rival. China has offered Poland participation in the New Silk Road project, and the US in the Transatlantic Trade and Investment Partnership (TTIP) agreement.

It is in the US’s strategic interest to block not only China, but also Russia, the other major contester of the pax Americana paradigm, from closer relations with the European Union. Thus the goal of the trans-Atlantic trade agreement, currently being negotiated with the EU, is not only to boost the American trade balance, but also to weld Europe closer to the US and block any potential attempts at economic integration with Russia. Synergy between the EU’s – especially Germany’s – capital and technological potential and Russia’s capability in natural resources and demography could create another rival, after China, to contest the mantle of global leadership.

Fortunately, there is Poland, playing the role of a wedge between Germany and Russia in the global balance of power. Similarly to the US, Poland is keen to block any attempts at German-Russian integration. This is a life and death matter from Poland’s historic perspective.

Uncle Sam rules the waves

The United States has an important advantage over its rival, despite falling further behind China in trade balance terms. Thanks to the world’s biggest military fleet, the US controls the main sea routes needed by China for its international trade. Therefore the Chinese are seeking ways to level the playing field by consolidating and expanding land-based trade routes to Europe lying beyond American’s capabilities to project power. Hence the idea of the New Silk Road. Among the road’s possible routes, the northern path via Poland is the easiest to implement and potentially the most stable. Poland (and by consequence the European Union) is separated from China by a mere three national borders (China-Russia, Russia-Belarus, Belarus-Poland) and the route’s most basic infrastructure is already in place: cargo trains between Łódź and China have been travelling for over three years now. The planned southern route of the New Silk Road is still a distant prospect: most of the infrastructure has yet to be developed and, moreover, it leads through the chaotic Middle East. The fact that the European Union and China are split by many national borders on this route increases the risk that one of the transit countries could derail the cause.

‘Poland emerges as an element of two clashing power plays driven by USA and China.’

Thus Poland emerges as an important element of two clashing power plays driven by the two global super-powers. On economic grounds participation in the Chinese project appears much more lucrative. A cursory glance at the world map clearly shows that the most advanced civilisations, the globe’s wealthiest and densest population areas, are the ones with direct access to sea trade routes. Meanwhile China, as the world’s biggest exporter and one of its leading importers, plans to limit its share in seaborne trade and turn Poland, centrally located in the middle of Europe (and on EU’s eastern border), into its ‘dry port’, servicing the lion’s share of its trade with Europe. Being for most of its history a land-locked country, Poland didn’t benefit from the intercontinental trade that made the West rich. Now with the Chinese offer, this long-time disadvantage of Poland could potentially be reversed.

The main drawback of locating China’s goods-handling hub in Poland is the absence of north-south transportation routes, running perpendicular to the New Silk Road. The European Union’s development plans for transportation across the region are focused on east-west corridors. Hence China itself is lobbying for the creation of north-south trade lines and deeper integration of infrastructure as well as trade between countries on the Baltic, Adriatic, and Black seas, inadvertently championing Poland’s century-old strategic idea of building the so-called “Intermarum”, intended to eventually become a regional counterweight to Russian and German power.

A manifestation of the Chinese efforts is the intergovernmental consultation platform established by Beijing between China and the leaders of 16 CEE countries. The countries involved are, besides China and Poland, 10 EU countries and five non-EU Balkan states. At these annual summits, Poland is encouraged by Beijing to play the role of informal leader of the CEE countries. The first inaugural summit took place in 2012 in Warsaw and since then the initiative has gained momentum year by year. This August, several countries established the so called Three Seas Initiative during a summit in the Croatian city of Dubrovnik inaugurated by Polish president Andrzej Duda. The initiative is intended to become a formal framework for the infrastructural integration of the states between the Baltic, Adriatic and Black Sea.

The recently established Asian Infrastructure Investment Bank will most likely be used as a financial vehicle helping countries across the region to shoulder the costs of building an interconnected network of transportation corridors. The bank was formed on China’s initiative to help fund New Silk Road-related infrastructure investments and to promote trade in the Chinese currency. Poland is one of the bank’s 57 founding states, contributing just under one percent of its equity capital. It is widely believed that China would like the bank to become an alternative to the World Bank and the International Monetary Fund which safeguard the greenback-dominated world monetary order. Thus it might not be a coincidence that Poland was the first European country to issue Yuan-denominated treasury bonds on the very same day the Three-Seas Initiative was announced. The bond issue was carried out on the Chinese interbank market and the papers were predominantly acquired by China-based institutional investors.

Exchanging orbits

The offer to participate in the US-led TTIP agreement looks weak in comparison with Poland’s potential prospects from participating in the new economic order spearheaded by China. TTIP’s main goal is to cement, and potentially expand, a system of economic ties that have sidelined Poland ever since 1989.

As a general rule, an economic centre develops by drawing strength from its periphery countries. Up to a point the situation can be advantageous to both parties. Peripheries that are effectively drawn into production and supply chains managed and financed by the economic centre, can develop along-side the centre itself. In recent decades Poland, as an economic periphery of the G7 countries, has been a clear beneficiary of the process. However, sooner or later, the synergy effect dissipates. Increased wealth is gradually pushing peripheries into a middle-income trap marking a dead-end to economic expansion based on low labour costs. Therefore the situation requires that the peripheries seek factors beyond wages to drive competitiveness and, as a consequence, calls for a redefinition of their role in the global economic cycle.

In practice, this forces them into abandoning their complementary role in foreign production & supply chains and manage on their own accumulated wealth and know-how. Hence, the middle-income trap will push the peripheries into a conflict of interests and direct competition with their former patrons. For the countries of the economic centre this is an existential threat, as maintaining one’s own peripheries is a precondition to maintaining a dominant position and ensuring further growth. The developing countries’ (especially China) gradual approach towards the middle-income trap is the main driver behind the crumbling economic order based on the dominant role of the United States and other G7 countries. The draft TTIP agreement is aimed at preserving what can be saved of the pax Americana, constantly under pressure by the growing economic prowess of China. The deal boils down to an array of legal instruments securing a dominant position on peripheral markets and hampering their ability to accumulate the capital necessary to overcome the middle-income trap.

Thus, Poland’s participation in the TTIP agreement could cement its peripheral position in the Euro-Atlantic landscape and impede its ability to tackle its greatest barrier to growth besides demographics. It is worth noting that other countries across Central and Eastern Europe, and Poland’s co-signatories of the Three Seas Initiative, are in a similar position. Meanwhile, participation in the Chinese new order, despite the clear disproportion between the economies of Poland and China, is generating synergies that could become a source of an entirely new competitive advantage.

The bear to the east

Yet there is a “but” in this puzzle: Russia. The lack of an adequate countermeasure to the Kaliningrad-based missile systems is a bigger threat to Poland than the middle-income trap. The threat requires Poland to have a significant exterior guarantor of its security. The Chinese offer however does not include any formal security guarantees similar to those stemming from Poland’s participation in pax Americana. China is not only in an ambiguous strategic relationship with Russia, but despite a fast-growing military budget – currently the world’s second largest – it still lacks the ability to project power onto distant military theatres in a manner comparable to the US.

Contrary to China’s pragmatic and Confucian approach, the second largest contestant of the world order, Russia, favours the “foot in the door” strategy. Taking into account that its economy is smaller than Spain’s (based on GDP in current USD prices), the only effective tool to impact the international landscape at its disposal is its oversized military-intelligence sector. Poland, as Russia’s neighbour, is especially prone to Russian attempts to test the actual limit of the Euro-Atlantic sphere of influence and the determination of the alliance to defend the current status-quo. Both Beijing and Washington are aware of the detrimental effect of ongoing Polish-Russian tensions on China’s strategic plan to develop the New Silk Road’s northern route. With the US acting as a formal guarantor of Poland’s security, any escalation in military tensions between the US and Russia will automatically strain Polish Russian relations and impede opportunities to monetise the economic synergies between Poland and China.

One can expect, therefore, that Polish-Chinese relations, recently elevated to a strategic level, can become a counterweight to the tense relationship between Poland and Russia. In its own best interests, China should be keen to pressure Russia to de-escalate tensions. Meanwhile, one can expect that the United States will be interested in doing the exact opposite in order to keep at bay forces challenging its power. That may eventually result in far more benefits for Poland’s deterrence capabilities than the basic political guarantees offered by NATO.

It is unclear which choice is better for Poland – the one which brings potentially better long-term economic prospects, but which is riskier in terms of security, or the one that safeguards Poland’s security here and now at the price of slimmer economic prospects in the future. It is also unclear to what degree it will be possible for Poland to participate in both simultaneously. What is clear, however, is that China’s emergence at Poland’s front door opens an entirely new dimension in the country’s foreign policy. No matter what Poland’s strategic choice will be, the fact that Poland finally has a choice at all, is already a factor that boosts its position in negotiations. Perhaps it wasn’t by accident that President Xi Jinping’s visit to Poland occurred only two weeks before July’s NATO summit in Warsaw, at which it was agreed to set up a permanent US military presence on Polish soil. That is far more than Poland has secured in its previous 17 years of NATO membership.

Transatlantic Trade and Investment Partnership is a proposed trade agreement between the European Union and the United States, with the aim of promoting trade and multilateral economic growth. The American government considers TTIP a companion agreement to the Trans-Pacific Partnership (TPP). The agreement is under ongoing negotiation.

The Silk Road Economic Belt is a development strategy and framework proposed by China that focuses on connectivity and cooperation among countries primarily between the People’s Republic of China and the rest of Eurasia. The strategy is a subject of ongoing negotiation between China and potential partners across Asia and Europe.

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Written by: Bartosz Stefaniak

Poland Today's co-founder and creative director. He has cooperated with Le Monde and Agence France Presse among others. Bartosz has also worked with Poland's Ministry of Foreign Affairs on different projects. He runs a blog about the balance of power in international relations (facebook.com/3wojna). For more information go to madeinPolska.eu