Because of the U.S.-China confrontation, Huawei doesn’t have many allies. Even Victor Ponta, the ex-prime minister who supported closer ties to China and facilitated Chinese investments in Romania, asserted that if Romania has to choose, it should take the side of the United States and the EU.
It’s not only Chinese 5G technology under the microscope in Romania — nuclear power and Cernavodă is also being reexamined. During Iohannis’ visit to Washington, he talked to U.S. President Donald Trump about U.S.-Romania cooperation in the civilian nuclear industry, which was mentioned in the joint declaration of the two presidents. In one of her last acts as prime minister, Viorica Dăncilă, the leader of the Social Democratic Party, signed an MoU with U.S. Secretary of Energy Rick Perry regarding civil nuclear cooperation. As Dancilă was known as a supporter of closer ties to China, the memorandum on nuclear cooperation was a surprise, as some saw it as an attempt to sabotage CGN’s investment by opening the door for an American company.
Geopolitics aside, Western companies are not interested in investing in Cernavodă, partly because it isn’t profitable, and partly because, after Fukushima, the Western nuclear energy sector has stagnated. The only sign of American interest in Cernavodă is in the form of an American-Korean consortium, which is interested in the modernization of reactors 1 and 2. But even this is not foreign direct investment, but a tender by Nuclearelectrica, which will pay around 1.5 billion euros in order to refurbish the two reactors.
With CGN building reactors 3 and 4, the American and Chinese offers seem to complement each other. Although there were rumors that the American-Korean joint venture may be interested in reactors 3 and 4, a person with knowledge of the situation told me that there won’t be any type of competition between the American and Chinese companies.
In the meantime, the United States has added CGN onto its entity list, which means that no American company will be allowed to sell technology to it. And now, the United States seems interested to attract other allies onto its side as well.
It’s not only the United States that is worried about Cernavodă, but also the EU and the National Liberal Party, which will probably form the next government. In May, party officials came out with a few inquiries regarding Cernavodă, related to the idea of a potential debt trap but without mentioning the word. They were interested to know if Romania would be forced to use only Chinese money or could access other types of funding; if the Chinese know-how is trustworthy; and if Romania could renounce the project sometime in the future, without penalties.
The biggest problem raised by the National Liberal Party in working with the Chinese company is that CGN was accused in 2016 of spying in the United States, albeit without any connections to possible allegations of spying on the Romanian plant. CGN is therefore in the same situation as Huawei, tainted by spying allegations and linked to the Chinese state.
The EU may have an important role to play regarding the Chinese investment in Cernavodă, because it wants to limit foreign investments, especially Chinese ones, in European critical infrastructure. To empower itself, in April, the EU launched a framework for screening foreign direct investment similar to the American CFIUS. Moreover, because the Chinese investment in Cernavodă also requires state aid, as Romania will subsidize the price of energy, the EU will probably investigate it, as it did with the Paks II Nuclear Power Plant in Hungary. But China has the Hinkley Point C precedent as a backup, when the EU accepted CGN’s bid to implement a nuclear project in the U.K., also with state aid.
The cases of Huawei and CGN in Romania, both caught in the current U.S.-China standoff, are relevant for the entire region. After signing an MoU with Romania regarding 5G technology, the United States followed up two weeks later with a similar (or even identical) MoU with Poland. And if CGN is forced to give up the Cernavodă investment because of U.S. pressure, its U.K. investment will probably share the same fate.
Once again, Romania, with a history of being caught between warring empires, finds itself having to navigate the competition between two great powers. As a firm U.S. ally, its choice will be decided by the amount of U.S. pressure. But what happens in Romania will be a good guide to how U.S.-China competition will play out, from the U.K. to Poland and beyond.
This article has been published by Andreea Brinza in The Diplomat.