EU offers loans to Lithuanian firms caught in crosshairs of Taiwan-China dispute

The EU will extend EUR 130mn to Lithuanian companies affected by the trade restrictions China has imposed on the Baltic country, the European Commission (EC) announced on Tuesday afternoon.

The scheme will run until 31 December 2027 or until the “discriminatory” restrictions are lifted, the EC wrote in a statement. Companies will be able to access loans of up to EUR 5mn, except those in the sectors of finance, agriculture, forestry, fisheries and aquaculture. The loans, aimed at helping Lithuanian firms to reorient their business strategies, will be repayable in two years, the EC added.

Lithuania’s dispute with the Asian superpower began in earnest in November, when it allowed the opening of a “Taiwanese Representative Office” in its capital city, Vilnius. China regards Taiwan as a breakaway province and was angered by Lithuania allowing it to open a de facto embassy in the EU country. 

The following month China began to restrict access to Lithuanian traders, who said their country’s details had been removed from the Chinese customs portal. This claim is supported by recently released Chinese customs data for Q1 2022, which showed imports from Lithuania fall by over three-quarters from the same period in 2021.

The EC has repeatedly raised the matter with China, but relations have worsened due to Russia’s invasion of Ukraine, which the Asian superpower refuses to condemn. Earlier this month the EU’s foreign affairs chief Josep Borrell described their bilateral summit as “a dialogue of the deaf”.

The EC statement released on 26 April said the exceptional nature of the situation is indicated by the EU’s launch in January of a case at the World Trade Organisation (WTO) against China’s “discriminatory” trade practices, which it said “threaten the integrity of the EU Single Market”. After the EU-China summit EC President Ursula von Der Leyen said “China must stop unjustified trade measures against Lithuania… Until it does, we will pursue our case.”

It is not only Lithuania’s stance on Taiwan that has angered Beijing. The Baltic country has also advised citizens against buying Chinese smartphones, opposed China’s involvement in new 5G telecoms networks, and even left its 17+1 economic initiative with Central and Eastern European countries.

Explaining his country’s position, Lithuanian Foreign Minister Gabrielius Landsbergis said “we believe that the economic relations established with democratic states are more sustainable and long-lasting.”

As China downgraded its diplomatic ties with Lithuania in November, an editorial in the government-linked Global Times dismissed the Baltic state as “just a mouse, or even a flea, under the feet of a fighting elephant”.

However Lithuania has the support of one global superpower, at least. Last week US Deputy Secretary of the Treasury Wally Adeyemo praised “Lithuania’s leadership on sanctions” and reaffirmed strong US support for the Baltic country in the face of “economic coercion” from China. Adeyemo had met with the Lithuanian Finance Minister Gintare Skaiste to discuss sanctions on Russia and Belarus, on 22 April.