- In November 2021, a Taiwanese Representative Office was opened in Lithuania.
- It was notable because it is for the first time that Taiwan was allowed to use its own name to open an office within the EU. (Lithuania is member of EU since 2004)
- Following this, China has downgraded its diplomatic relations with Lithuania, calling it a violation of the “One China Policy”.
- China has also unofficially boycotted everything from Lithuania. Taiwan, U.S. and the EU have expressed their support to Lithuania in what has been termed as a “David vs Goliath” battle.
First things First
Why Lithuania taking on China?
- Domestic Reasons
- Lithuania’s current wave of assertive moves against China to a certain extent has been attributed to the change of government in 2020
- The 2020 in Lithuanian elections brought to power a new coalition government dominated by Landsbergis’ pro-American conservative party and liberals vociferous about defending human rights.
- The new Government of Lithuania espouses a “values-based” foreign policy based on democracy and freedom, and had explicitly offered support to the cause of Taiwan in 2020 itself.
- Geopolitical Reasons
- Lithuanian actions are also due to the growing geopolitical tensions in Eastern Europe over EU and NATO’s fallout with Lithuania’s adversarial neighbours, Russia and Belarus.
- The growing Sino-Russian partnership against the West has also made Lithuania wary of China.
Wary of China
- Lithuania has been one of the biggest critics of China within the EU on the Xinjiang and Hong Kong issues.
- Lithuania has supported Taiwan’s pitch to become an observer at the World Health Organization in 2020 against China’s opposition in the wake of the COVID-19 pandemic.
- In May 2021, Lithuania quit the 16+1 dialogue format, which was initiated by China in 2012 as a multilateral forum for engagement with the countries of Central and Eastern Europe.
- Later in 2021, officials in Lithuania discovered that a popular Chinese-made handset sold in the Baltic nation had a hidden dormant feature to censor 449 terms banned by the Chinese Communist Party. Citing security reasons, Lithuania advised its population to avoid buying smartphones made in China.
- Lithuania has also kept China away from acquiring controlling stakes in its Klaipėda seaport, as well as from its 5G infrastructure bids.
What is Chinese Reaction?
- China’s foreign ministry accused Lithuania of crossing a “red line” on letting Taiwan open office in Vilnius and urged it “to immediately rectify its wrong decision” and “not to move further down the wrong path.”
- Over the Mobile advisory by Lithuania, Chinese media derided the Lithuanian report as a “new trick” by a small “pawn” in Washington’s anti-China agenda.
What did China do?
- In November 2021, China downgraded its relationship with Lithuania by permanently recalling its ambassador from the country.
- It has also downgraded diplomatic relations from ambassadorial level to that of chargé d’affaires. (Lithuania also withdrew its diplomatic staff from China expressing safety concerns.)
- China is also putting pressure on companies to stop sourcing products from Lithuania for China-bound exports, threatening that they will lose access to Chinese markets if they do so.
- China alleges that Lithuania is acting in concert with the American efforts of containment by using the Taiwan card, and to spread discord between China and Europe.
What is the impact on Lithuania?
- China amounts to only one percent of Lithuania’s exports but its imports from China are five times more.
- So, the direct political & economic impact on Lithuania has been rather manageable. That is why a nation with little over 3 million population is taking on a giant with 1.4 billion people ruled by authoritarian CCP.
A bigger issue
- Lithuania has been impacted heavily by an unexpected strain on its trade with partners in the rest of Europe, which are highly dependent on China.
- The EU is currently China’s largest trading partner, and about 80-90 percent of Lithuania’s exports are based on manufacturing contracts with the rest of the EU.
- The customs authorities in China have apparently stopped processing such direct and indirect goods sourced from Lithuania.
- Through this indirect attack, China is seen as trying to weaken European support to Lithuania.
- In fact the current issue has widened the political differences between Lithuania’s current President and its coalition government.
How is Lithuania managing?
- Taiwan has made efforts to compensate the Lithuanian economy from China’s coercion.
- Recently, about 20,000 bottles of Lithuanian rum that had been bound for China (rejected) was bought by the Taiwan Tobacco and Liquor Corp (TTL), offering a symbolic gesture of support.
- Taiwan has come up with a $200 million investment plan to help cover Lithuania’s economic losses.
- Taiwan is also hoping to access the EU market via Lithuania. (There is already a semiconductor supply shortages)
- Taiwan is also planning to introduce a $1 billion credit program aimed at benefiting Lithuanian businesses.
The Big Questions
- How long can Taiwan/US continue this?
- Is Lithuania the catalyst to break China-EU relations?