DAVA Mercantile Digest no. 5 by Horia Ciurtin, Senior Expert & Founder

(also see in .pdf format)

The Powder Keg: Still (Economically) Volatile

Just like a century ago – and throughout their entire history – the Balkans remain a zone of structural instability. In this respect, the demise of the Cold War confrontation (and rhetorics) did not bring along the advent of a stable, rule-based environment. Therefore, although the Balkan area is an essentially coherent cultural sub-space, while still being radically diverse, the relations of its constituent states have been marked by a confuse set of bilateral – and adversarial – interactions.

This resilient anarchy in Balkan coexistence has only proved to benefit external players. Consequently, each state – however fluid such notion may be at this European ‘periphery’ – sought to ‘balance’ the other by adhering to another global power’s grand strategy. Diverging loyalties only reflected – and continue to do so – the global rivalries at a sub-regional level, where no such oppositions appear natural or inevitable. The nature of the risks involved in the area has – however – changed, also paving the way for different types of confrontations, armistices and imperfect solutions. Bismarck’s old keg might look differently, but it is nonetheless still filled with gunpowder.

More precisely, from a once strategically and militarily troubled area, the Balkans appear nowadays as touched ‘only’ by economic malaise. Within and outside the EU, within and outside NATO, this patchwork of states with competing and overlapping allegiances has proved a fertile (but troubled) ground for foreign investment and international trade. As a vital link between the Black Sea and the Mediterranean, between Asia Minor and mainland Europe, the Balkans are not just a transit route, but also a potential hub for the global flux of capital in search of a strategic haven at the crossroads.

The real problem of investing in this area largely reflects the shortcomings of the geostrategic zero-sum game. All the external players interested in ‘rooting’ themselves in the Balkans mainly tend to do so from geopolitical imperatives and when they do, their further intention is to build up momentum and drive out their global competitors from such markets. In essence, the ‘great game’ is repeated in a claustrophobic patchwork of polities, with no other intention but attaining the fine balance needed in realpolitik calculations. Thus, in such a paradigm, hegemony is the keyword. Economic hegemony.

Enter Autonomic Multilateralism: A (Possible) Way Forward

The actual – and sustainable – development of the Balkan area is left on a secondary level. A rhetoric and academic endeavor at most. Nonetheless, even for major power brokers, it should appear evident that an economically consolidated Balkan space would lead beyond the mere zero-sum game for all competitors involved. Veritable development would translate into an outsourcing of economic security and into a reduction in costs for ‘keeping the others out’, making the Balkan states less receptive to mixed incentives (economic plus military/strategic packages) and to financial hijacking by global actors.


In other words, ensuring the autonomy of the Balkan space through investments would benefit the whole range of interests involved. A first step would be to determine Balkan polities to pool their resources on a multilateral level. By blocking the diffuse and adversarial nature of bilateral negotiations, often simply mirroring global allegiances, such a collective manner of interaction would lead to harsh discussions, but conclusive results.

Moreover, prioritizing such a negotiation and moving it higher on the list than the over-exalted comprehensive pacts with the EU ‘neighbor’, the US ‘guardian’, the Russian ‘protector’ or Chinese ‘partner’, would awaken a certain conscience of a shared Balkan economic destiny. Not one without asperities or divergences, but one that is enhanced by competition. The fact that some of these states are already EU members can only relieve the Commission of its increasingly burdensome mission and allow it to exercise its leverage by local proxies. And so could the other actors …

CEFTA: EU’s (Imperfect) Solution

At the moment, the EU has a cooperation mechanism in place for the Balkans. One that is almost working: CEFTA. Put forward to prepare candidates to membership for accession to the Union, CEFTA is – in essence – an antechamber of the EU. It is designed to be a framework for (economic) regional cooperation among non-member states that share – more or less – a certain degree of harmonization with the EU’s legislation and political objectives. It is a multilateral free trade area in itself. However, every CEFTA state’s relations with the Union take place on a strictly bilateral basis. Its constituent parties form a (temporary) economic bloc, but which does not deal with the EU in a unitary manner.


 The most stringent shortcoming of CEFTA is that it consists only of non-EU states, being confined to the WB 6 (plus Moldova) and leaving such states once more on the ‘fringes’ of Europe until they become ‘full’ members. Once they join the Union, they have to leave CEFTA and join another ‘club’. CEFTA – thus – seems to have no life of its own, just a limbo that prepares states for a distant membership reward to the EU. Without an actual life, CEFTA has no future.

Multilateralism Beyond CEFTA: A Way Forward

Moving past the legal – and political – aporia presented by CEFTA, a medium-term solution might be well at hand if the EU central institutions encourage their ‘local’ member-states to advance together a one-time deal for the WB6: a comprehensive trade-and-investment multilateral treaty. A cooperation format that – unlike CEFTA – allows Balkan states that are already EU members to join their non-EU peers in such a sub-regional project.

The main idea for making such an agreement operational is to attain a sufficient level of cohesion within the Balkan space, while also mingling EU and non-EU member states together. This appears necessary as Balkan states need to take into consideration that – at least for some of them – EU membership is a very long way ahead, if at all. In addition, the EU they might eventually join shall be a very different one. Maybe even one of ‘multiple speeds’ in which they will have to fiind their own (regional) pace.

However, the Balkans and their strategic-cultural structure is a constant feature. And if a multilateral cooperation format would emerge (irrespective of EU membership), featuring older EU member states (such as Greece, Slovenia, Romania, Bulgaria, Croatia), no concerns should appear that the WB6 would somehow be ‘left aside’. On the contrary, even if they would not manage to finally join the EU, the membership in such a cohesive Balkan space would still represent a way in for European goods and capital.

Instilling a multilateral trade and investment framework in the Balkans would allow this recalcitrant area to draft its own rules, while taking into consideration all the existing dynamics and not fall into the diplomatic trap of global balancing. Regional games can also be regionally played. A micro-space open for investment and commerce, at the fringes of Europe, might prove to be a better option than insisting to forcefully integrate it in a globalized flux for which it is not yet ready.

In addition, a different type of settling trade and investment disputes could be conceived in this limited geographic framework. Beyond the classical ISDS and surpassing the ‘revolutionary’ elements of the Commission’s ‘investment court system’, the apparatus for solving such cases should take into consideration the numerous ‘incidents’ in the Balkans. However, given the fact that such investors are aware of the complicated economic situation, a larger regulatory margin could be left in the states’ competence. Nonetheless, what might be truly innovative in this regard would be a compulsory enforcement mechanism which should function directly within all those states, in accordance with a simplified treaty-based procedure, circumventing any recourse to domestic rules.

Thus, in an area of lasting paradoxes, trade-and-investment multilateralism might prove a key to development and to the defusion of tensions. For the Balkans, more regional might prove more global. More autarchy might – over time – become more openness to the world. And the powder within the keg might turn into something less volatile …

Horia Ciurtin, Founder and Senior Expert of DAVA | Strategic Analysis; Associate Expert for New Strategy Center, a reputed strategy think-tank with offices in Bucharest, the Managing Editor of the online platform for the European Federation for Investment Law and Arbitration (Brussels), the EFILA Blog, as well as Legal Adviser in the field of International Investment Law. At the present moment he is also conductind doctoral research under the aegis of the Amsterdam Center for International Law (University of Amsterdam). He can be contacted at horia.ciurtin@davastrat.org

This report represents an updated – and partially rewritten – version of the author’s material published on the Kluwer Arbitration blog.


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