By Emma Farge and J.R. Wu
DAKAR/TAIPEI (Reuters) – A state-run Taiwanese bank has successfully sued two African countries for $212 million in unpaid loans and brought a claim against a third, court documents showed, in a possible warning to allies who switched sides in Taiwan’s spat with China.
The three claims brought by the Export-Import Bank of the Republic of China <EXIMC.UL> before a U.S. district court against Guinea Bissau, Central African Republic and Democratic Republic of Congo amount to a total of at least $261.4 million including loans and interest.
The first case is pending and the other two Eximbank won.
“We see this as a commercial loan case,” Johnson C.T. Liao, vice president and spokesman for Eximbank, told Reuters. He said most of Eximbank’s loans are international and are repaid.
“Usually there is a long period of negotiation. Then when we can’t find a way, we have to go through the legal process to protect the debt claims,” Liao said.
But analysts say the legal action by Eximbank, which falls under Taiwan’s finance ministry, is likely to be a warning about the costs of forging diplomatic ties with China.
Guinea Bissau and Central African Republic have withdrawn support for Taiwan since the loans were disbursed and Congo did not ditch China even after receiving the money.
Taiwan’s foreign ministry said it could not comment on the matter because the case involves commercial loans. A Guinea Bissau official said the government was committed to responding to this claim under the rule of law but that its first priority is the welfare of its people and stability of the country.
Officials in Congo and Central African Republic did not respond to requests for comment.
“It is not surprising that Taiwan would seek repayment from nations that switched allegiance,” said The Atlantic Council’s Robert Manning, noting new tensions in China-Taiwan relations since the election of Tsai Ing-wen as president last year.
Tsai is also the leader of a ruling party that traditionally advocates independence for Taiwan, a red line for Beijing.
“It is in part about getting their money back, but in no small part, a bit of retribution,” Manning said.
DEBT RELIEF CONTROVERSY
All the claims filed at a district court New York State and seen by Reuters are for loans dating back to the early 1990s — a period when Taiwan and China used “dollar diplomacy” to attract allies in Africa after the end of the Cold War.
The borrowers each failed to repay any principal and most of the interest on the loans, the filings showed.
Taiwan has competed with China for recognition since defeated Nationalists fled there in 1949 at the end of China’s civil war, but the tables turned in Beijing’s favor in the 1970s when the United Nations and United States switched sides.
Only 21 mostly small and poor countries recognize Taiwan, and a person familiar with government thinking says maintaining allies is difficult since they can always ask for a better deal or go to China instead.
In the last two decades Taiwan, whose economy is 20 times smaller than China, has struggled to compete with Beijing’s billions of dollars in aid and debt annulments. In Africa, only Burkina Faso and Swaziland still recognize Taiwan.
As recently as December, Sao Tome and Principe broke ties with Taiwan in favor of China, a decision the west African nation’s prime minister, Patrice Trovoada, explicitly linked to development aid expected from Beijing.
All of the Taiwanese bank’s cases have been brought since December 2015, according to the filings which are lodged in a public database whose existence few are aware of.
Judges found in favor of the bank in the cases of Congo and Central African Republic for $57.3 million and $154.9 million respectively in two separate rulings in January 2017.
It is unclear how the countries will settle the claims. The case brought in June last year against Guinea Bissau adds up to at least $49.2 million, or nearly a fifth of its last budget.
Bissau is arguing that the time frame for proceedings has expired, according to a memo submitted this month. The official said he hoped a resolution could be reached by year-end.
Claims against some of the poorest, most unstable countries in Africa are controversial as many states have been granted debt relief under an International Monetary Fund and World Bank initiative after extensive campaigns to relieve Third World debt.
However, Taiwan has not been admitted as a full member of either body.
“The coffers are virtually empty and paying the attorneys in New York is a lot for them,” said a Western diplomat, referring to the case against Guinea Bissau, which has experienced coups, and a civil war since taking the money and is now in the middle of a political crisis.
No defense lawyer details are listed for Central African Republic, where more than three-quarters of the population lives in poverty, or for Democratic Republic of Congo, in a possible sign of a lack of money or expertise.
Former Taiwan ally Niger managed to cut a claim by Eximbank to $20 million from $183 million in a 2015 deal.
(Additional reporting by Jonathan Stempel in New York, Liang-sa Loh in Taipei, Alberto Dabo in Bissau, Crispin Dembassa-Kette in Bangui and Aaron Ross in Kinshasa; Editing by Tim Cocks and Giles Elgood)