The worsening of the business environment in a scenario of geopolitical complications

By Víctor Cortizo, Lawyer and Professor of International Law

In the current context of current geopolitical circumstances, it is becoming more and
more evident that business and economic activities are threatened and disrupted by
numerous geopolitical factors. It is therefore more necessary than ever for companies
with an international presence to examine the risks they face in today’s European
business environment.

We are in a world that is beginning to develop what can be known as an economic cold war. Some
countries in the Baltic region, such as Lithuania, have found themselves in this environment and the
focus of some of their actions has generated an increase in tension and complications beyond their
borders and interests. Faced with the growth of rivalry in China and the United States, concepts that
we have already seen in the past are made known, but that are increased mainly in an economic
development based basically on political alliances. This concept has been used in some cases as a
means of indirect pressure by using third countries to stress certain situations. We have seen it
defined by the US Treasury Secretary, Janet Yellen, promoting the concept of “friendshoring” value
chains to develop economic relations with politically allied nations. It is a concept that is not new, but
perhaps it had not had such an intense impact as it does now. We have found an example in Europe
itself and in a context of conflict such as the current one in Lithuania. This small nation has become
the center of attention for its confrontation with China, in what seems to be from many points of view a
political confrontation with important economic consequences and consequences that are difficult to
foresee. The situation has been complicated by the war between Russia and Ukraine, which has
made the situation in the Baltic region a little more difficult and turned the Sino-Lithuanian tension into
a source of tension that causes even more pressure on this country. This global situation, with
numerous sources of conflict or tension, of which Lithuania is an example, becomes a call to improve
the multilateral system with the aim of limiting or preventing political interference from increasing
tensions and, above all, from manifesting a bankruptcy in international trade or investment. It is vital to
maintain the bridges that allow us to continue with an environment of progress and trade that the
world currently needs and that it will need even more as an element to rebuild economies after the
COVID 19 crisis or the war in Ukraine. It is especially delicate that this happens on the continent
where the European Union was founded based on an ideal of peace through economic
interdependence between countries. This idea, and this European dream must be kept alive and
Ukraine has a huge challenge, because after the cruel war it will need a large amount of mainly
European aid for reconstruction. The situation in Lithuania puts us in direct contact with the risks we
have in the European environment if we lose sight of our values, our gaze at a future in peace and the
development of an economic activity without barriers that allows free and multilateral development.
The situation in Lithuania was not very positive a priori, some companies denounce the existence of
complicated procedures to obtain business and residence permits, as well as some cases of
corruption or transport barriers due to insufficient air connections with European cities, but some
decisions or Attitudes that are not in keeping with the necessary European unity have not done much
to improve this.

The case of the Galician company GRUPO PUENTES

In January 2022, the Lithuanian government halted the signing of a contract between the state railway
company and the Spanish company GRUPO PUENTES. The argument for the stoppage was the
group’s connections with China, which was basically the presence of the China Road and Bridge

Corporation (CRBC) in its shareholding. This investment partner does not participate in unilateral
decisions on the management of the company, development projects and other aspects. Even the
Spanish company indicated at the time that all decisions about the Lithuanian bridge construction
project would be made and executed by a Spanish team.This situation caused, according to some
media, a letter from the then president of the Xunta de Galicia and currently leader of the opposition
Alberto Núñez Feijoo to the Lithuanian Ambassador in Spain protesting this situation, requiring an
article in the Galician press from the Consul of Lithuania in Galicia with the desire to placate spirits
and above all try to recover a climate of trust that for now is difficult.Regardless of the actions that this
Galician company can carry out or has carried out, this case is a dangerous precedent. The
shareholding of a foreign group in a European company cannot cause such a reaction from a
government, in this case the Lithuanian, and if this criterion is used for decision-making, the
consequences of all kinds would be difficult to determine. In this case, we can see that Lithuania
adopted an economic policy position oriented towards a partial vision, giving the impression of making
a decision against China through a Spanish and therefore European company. Chinese companies
have a large number of investments worldwide and this Galician group is just a small example. If this
situation were repeated, all the companies that have received Chinese investment in the world (or
from other countries in other contexts), would have to rethink their activity or investment before
starting to carry out projects in Lithuania or in general in countries with a similar vision. This situation
has not been managed peacefully internally either, and there are several business groups that have
expressed their uneasiness and opposition to some political measures and attitudes that hinder the
international business activity of Lithuanian companies. The economic and business situation is
witnessing moments of deep uncertainty and it is difficult to clearly see the scope of the current
situation. In this environment, some attitudes should turn on the alarm light and the freedom of
European companies that act with full capacity without the political situation or origin of their
shareholders being able to become disturbing elements of their international activity should be closely
monitored. The Lithuanian decision that we have given as an example is not limited to a specific
situation of a Spanish company there, it has a much broader scope by creating or nurturing an
intervention model that will only hinder economic recovery, the environment of peace and above all to
the necessary economic normalization that will be able, among other things, to help the reconstruction
of Ukraine and the development of investment and international trade as normal.

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