DIVIDE ET IMPERA: THE NEW CHINA-LED INVESTMENT BANK, THE EUROPEAN UNION AND THE UNITED STATES

Photo credits: www.aiibank.org

The deadline for applicants to become ‘founding members’ of the Asian Infrastructure Investment Bank (AIIB) – the new China-led investment bank with an initial capital of around $100bn – closed on March 31st, with at least the disappointment of the United States. Indeed, despite Washington’s lobbying activity to convince the EU Member States not to join it, 14 of these – with the UK at the head of the ‘defectors’ – decided to apply for becoming founding members of the new international financial institution (IFI) that in a near future may be able to challenge – at least potentially – the two US-led and Washington-based IFIs: the International Monetary Fund and the World Bank. What the US probably cannot tolerate is that their ‘special partner’ in Europe has been, in this occasion, their Brutus. The first capital that decided to send its application to the AIIB has indeed been London.

According to an unnamed senior US administration official, as reported by the Financial Times and other major British mass media, Washington blamed London for taking this decision without any «consultation with the US». Moreover, the White House is «wary about a trend toward constant accommodation of China» by European states. Not only the US, but also Japan fears that the AIIB could expand China’s influence in the world, especially because it is an institution whose aim is to fund development programs (even if only those that concern infrastructure-building) – that is, exactly (a part of) what the WB, the IMF, and the Asian Development Bank (ADB) already do. Thus, although both Christine Lagarde and Jim Yong Kim – respectively the International Monetary Fund Chief and the World Bank President – assured that the WB and the IMF will co-operate with the new Shanghai-based bank, it is undoubted that tensions will spread soon, as it often is between overlapping organizations.

Moreover, while the US have found something that could compensate this lost vis-à-vis Beijing – that is, the agreement with Iran – Tokyo could see the eventual expansion of China’s influence in the field of funding investments in Asia as something threatening its privileged position in this field. In fact, the head of the ADB is always Japanese. Moreover, it could complicate even more the already-deteriorated relations between the two Asian powers and their conflict over the Senkaku/Diaoyu Islands.

With regard to Europe and the EU, the first signal of the negative impact that tensions between the US and China (to simplify) could have on the region is represented by the uncoordinated answer of the EU Member States to the Beijing initiative: 14 of them have asked to be part of the AIIB founding members, and 14 did not. As noted by professor Thomas Renard in his Egmont Security Brief of April (No. 63, 2015) «China has shown a new ability to attract followers and to divide its opponents»: not only the US versus the EU, but also the EU itself is divided internally. However, even if «[t]his could mark a major turning point in global power politics […] it will take China more than a new bank to undo decades of co-operation and partnership among Western nations». Nonetheless, the lack of a common response by the EU as a whole weakened the possibilities of European states to influence AIIB from the inside, for instance in adopting narrow and more IMF/WTO-like norms and standards in defining its investments.

During the last months, from the conflict in the Middle East to the participation in an IFI, and despite the immense efforts of VP/HR Federica Mogherini and her staff, the EU has appeared more and more divided by its Member States’ national interests and by their incapacity/unwillingness to adopt the basic rule of commonality, negotiations, and in the end of democratic relations – that is, sub-optimal outcomes reached through compromises for the sake of the community.

However, the hope is that EU Member States that will be also members of the Asian Infrastructure Investment Bank could play an important role, especially in shaping the AIIB governance mechanisms and project standards, as the environmental one. Still, «it is unclear whether Europeans can really influence China at all». And «Europe’s uncoordinated response to the AIIB and China’s ability to divide and rule suggests that it will be [a] difficult» task.