In southeastern Europe, Montenegro needed a good road and China offered to build it. Montenegro is not sure now if it can pay for it, and it owes China the equivalent of a quarter of its economy.
"A copy of the loan contract reviewed by NPR shows that if Montenegro is not able to repay China’s state-owned Export-Import Bank on time, the bank then has the right to seize land inside Montenegro, as long as it doesn’t belong to the military or is used for diplomatic purposes. "
That’s true, you can offer other assets as collateral to secure a loan, but that is typically for unsecured loans (where the loan is not applied to some underlying asset). In this case, the underlying asset, the highway and presumably also the land for the highway, would likely be the collateral on the loan.
In any case, one should be extremely wary of state actors in the case of sovereign debt. The potential geopolitical risk can be great, as we saw in the case of Greece when it tried to default on its debt.
"A copy of the loan contract reviewed by NPR shows that if Montenegro is not able to repay China’s state-owned Export-Import Bank on time, the bank then has the right to seize land inside Montenegro, as long as it doesn’t belong to the military or is used for diplomatic purposes. "
That seems fairly normal to me for an asset backed loan.
Not normal if it’s any land that is not the land belonging to the asset.
I’m not an expert on this, but you can offer up one asset to secure a loan on another.
For example, if you have two houses, you can secure a loan to buy a third house using one of the two you own.
That’s true, you can offer other assets as collateral to secure a loan, but that is typically for unsecured loans (where the loan is not applied to some underlying asset). In this case, the underlying asset, the highway and presumably also the land for the highway, would likely be the collateral on the loan.
In any case, one should be extremely wary of state actors in the case of sovereign debt. The potential geopolitical risk can be great, as we saw in the case of Greece when it tried to default on its debt.