How a Greek Port Became a Chinese ‘Dragon Head’

Photo Credits: Photo 1 XXXXX

How a Greek Port Became a Chinese ‘Dragon Head’

During the Ming dynasty, a single man defined China’s maritime strategy. His name was Zheng He and his travels along the coast of the Indian Ocean are often compared with those undertaken by Christopher Columbus, with the biggest difference between them being that Zheng’s maritime campaigns were based on a soft power strategy and weren’t an act of conquest. More than six centuries later, Xi Jinping, China’s president, launched a new maritime strategy explicitly drawing on Zheng’s legacy: the 21st Century Maritime Silk Road. The Maritime Silk Road is one part of a larger project, the One Belt, One Road (OBOR), which aims to connect China with Europe by land and sea.

Launched with much fanfare by president Xi, the OBOR initiative was received reluctantly by some international analysts, due to the scarcity of information surrounding this project, but also due to its lack of feasibility (the OBOR corridor connects war zones interspersed with ethnic and religious conflicts). But for China there is no impossible task. For the maritime leg, Beijing devised a strategy that entails taking control of important ports that encircle the Indian Ocean, in an attempt to rebrand the American-defined strategy of the String of Pearls into a more benign and friendly concept.

The Mediterranean Sea is also a focal point for China, whose main economic partner is the European Union. Since 2008, the port of Piraeus, in Greece, has been a gateway to Europe for Chinese products, and big companies like Huawei, ZTE, Samsung, HP, and Sony already use the port to enter the European market. In 2008, the Chinese state-owned company COSCO (China Ocean Shipping Company) acquired the operating license of Pier II for a period of 30 years (later expanded to 35 years), in concert with the permission to built another pier, Pier III. China’s involvement in the Port of Piraeus has cost $532 million, but COSCO has succeeded in transforming its part of the port into a successful business, contrasting considerably with the Greek–led pier, which is plagued by inefficiency, controlled by labor unions and doesn’t handle much traffic.

Recently, China, through COSCO, bought a 67 percent stake in Pier I from the Greek company that operated the pier, the Piraeus Port Authority S.A. It will be a twofold acquisition. For the moment, COSCO will buy a 51 percent stake for $316 million, followed by a second tranche of 16 percent in the next five years, at a value of $99 million. The transaction is orchestrated by the Hellenic Republic Asset Development Fund (HRADF), a Greek fund that manages Greece’s privatizations. The Pier I acquisition is a wildcard for China, because it will place the Port of Piraeus in a VIP class, alongside big European ports like Hamburg, Antwerp and Rotterdam. Pier I handles the lighter business of the port of Piraeus, being the biggest passenger port in Europe and facilitating the travels of 18 million people each year.

For ordinary Greeks, the sale wasn’t the beginning of an odyssey in the quest for the Golden Fleece, as COSCO Chairman Xu Lirong metaphorically presented it, but an act of betrayal. The Tsipras left-wing government, when on the cusp of winning its mandate, opposed and later halted the sale. But in a 180 degree turn, the Tsipras government became eager to reach the $4 billion privatization threshold for 2016, promised to the EU for bailing out Greece for the third time since 2010. While the transaction was auspicious for the Greek Prime Minister Alexis Tsipras, who received an official invitation to join his Chinese counterpart, Li Keqiang, in a visit to Beijing, the dockworkers took to the streets of Athens, halting the activity of the container terminal and striking against a decision that puts their jobs in jeopardy.

For China, speaking through the voice of its ambassador in Greece, the COSCO Piraeus project is a “dragon head,” meaning something of paramount importance in the region, and the perfect embodiment of the “five pillars of the Belt and Road Initiative, namely policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bonds.” The ambassador also mentioned the Belgrade-Budapest railway, whose blueprint involves plans to continue through Skopje (Macedonia) toward Piraeus (Greece). In the best case scenario, the railway is supposed to become a nexus between the Mediterranean Sea and the North and Baltic Seas, known as the China-Europe Land-Sea Express Route – a behemoth project which entails cooperation between a large number of European countries and which has a European doppelganger, the Orient/East Med Corridor.

In a nutshell, the Orient/East Med Corridor is an EU-led project that “comprises rail, road, airports, ports, rail-road terminals” and connects the North Sea with the Mediterranean Sea in an attempt to create a European backbone transport area. It passes through nine EU countries, starting from the German ports of Bremen, Hamburg, and Rostock, heading to the Czech Republic, passing through Austria and Slovakia, and then continuing via Hungary and the western side of Romania and Bulgaria, with a link to port of Burgas (Bulgaria) and Turkey, and further south to Greece, where its final stop is in the ports of Thessaloniki and Piraeus. The corridor will be connected to a “Motorway of the Sea” that links the European mainland with Cyprus. More feasible than its Chinese counterpart, because it goes through EU countries and doesn’t pass through national or ethnic conflict areas like those between Greece and Macedonia or Serbia and Kosovo, the Orient/East Med Corridor design enjoys a more realistic future.

Coming back to the Chinese-proposed railway, although its implementation will be difficult, there are rumors that after the Piraeus Port acquisition, COSCO will set its sights on TrainOSE, the Hellenic railway operator which may give the Chinese company the perfect leverage to propel its business into a European transshipment hub.

China also has designs on other ports in Europe, such as the Turkish port of Ambarli, where COSCO set up a joint venture with China Merchants Holdings (International) and CIC Capital Corp (also two state-owned Chinese companies) to buy a 65 percent stake in the Kumport terminal. The Kumport terminal, together with the Port of Piraeus, could be integrated in a larger regional business strategy. Thanks to its capacity to receive ships of 18,000 TEU (Twenty-Foot Equivalent Units), COSCO can create a Chinese shipment hub in the Mediterranean Sea. All this, combined with the stakes that COSCO owns in the Suez Canal Container Terminal and the Port of Antwerp (Belgium), will create a network of shipment routes that will wrap around Europe’s shores.

But China’s economic charm goes beyond direct investment. The port of Venice is aiming to transform itself into a Venice Offshore Onshore Port System (VOOPS), preparing for docking megaships of 18,000 TEU and beyond. Italy hopes that this project will attract the attention of Chinese companies. It’s apparently working; in 2015 a large Chinese delegation visited Italy and took part at a gala dedicated to the rebuilding of the New Silk Road, having Venice as a terminus point.

While it is unclear how the acquisition of the port of Piraeus will redesign China-Europe relations in concert with the Belt and Road initiative. The mixture of European-Chinese dreams will probably gain momentum in an attempt, from both sides, to maintain economic growth. One can hope that these projects will take shape and until then, an optimistic stimulus is provided by the possible establishment of the China-EU joint investment fund.

This article has been first published on The Diplomat website.

Photo Credits: The Port of Piraeus (Flickr/Jeffrey); The Port of Piraeus seen from a boat (Pixabay/doukasnik)

China, China-Europe, Port of Piraeus

Andreea Brinza

Andreea Brinza is a researcher and the Vice President of RISAP. Her interests are related to the geopolitics, geostrategy and geoeconomics of the Asia-Pacific region and especially China. Her research focuses on the Belt and Road Initiative.