Over a decade ago, when Greece was on the brink of bankruptcy, Piraeus was just a decaying port. In these difficult times the Chinese Ocean Shipping Company, also known as COSCO came into play and began managing the port’s container terminals. During these years the port has been expanded, modernized, and linked to rail networks, and began to regain its old vitality. September 2021 COSCO and Greece agreed to amend their 2016 agreement and COSCO received an additional 16% stake and raise its total share to 67% in the port of Piraeus which deal has intensified unease in the EU.
Xi Jinping’s large-scale maritime strategy, launched as the 21st Century Maritime Silk Road, is one part of a larger project, the Belt and Road Initiative (BRI), which aims to connect China and Europe by land and sea. The 21st Century Maritime Silk Road starts in China crosses Southeast Asia and India, after having passed the eastern coast of Africa, arrives in Europe via the Red Sea. The Mediterranean Sea is also a focal point for China, whose main economic partner is the European Union so China’s utmost importance is to be able to reach the European continent and thus the European Union member states by sea, for that the port of Piraeus means a gateway to Europe.
On April 27, 1961, COSCO was founded as the first freight company of the People’s Republic of China. As a state-owned shipping company, COSCO has always followed China’s foreign policy aspirations. In 1978 when China adopted the reform and opening up policy COSCO had gradually globalized and modernized its operations and management. A few years later was actively involved in the “Go Global” strategy as well with the establishment of China Shipping (HK) Holdings Co., Ltd., which was a key step towards the overseas market. Following the Chinese Communist Party’s direction, COSCO purchased Piraeus port in Greece in the spirit of the Belt and Road Initiative.
The first contract was signed in the presence of the then-China’s President Hu Jintao in 2008, in which Greece – that was under a great pressure by the IMF that time – transferred the right to operate exact part of the port of Piraeus to COSCO, but it had not yet get ownership at that time. COSCO acquired the operating license of Pier II for a period of 30 years, which later expanded to 35 years, in concert with the permission to built another pier, Pier III. On October 1, 2010, one of COSCO’s subsidiaries, Piraeus Container Terminal (PCT), officially began operating the port’s container terminals, putting the then-struggling port on an upward trajectory, giving a major boost to the Greek economy. China’s involvement in the Port of Piraeus has cost USD 532 million, but COSCO has succeeded in transforming its part of the port into a successful business, contrasting considerably with the Greek labor unions led pier, which is underutilized, obsolete and doesn’t handle much traffic.
Subsequently, under a 2016 privatization deal, COSCO purchased a 51% stake in the Piraeus Port Authority (PPA). An additional 16% stake has been promised for COSCO if it commits itself to 5 years, during which period have to make a mandatory investment worth around EUR 294 million in the port. This new agreement was signed on April 8, 2016 by Stergios Pitsiorlas, President of the Hellenic Republic Asset Development Fund and Feng Jinhua COSCO’s financial executive, in the presence of Alexis Tsipras the Prime Minister of Greece and Xu Lirong, the President of COSCO. Under the agreement China would thus gain 67% of the shares of the Greek state-owned company PPA in 2021.
Negotiations about the 16% stake has begun in August 2021, in the circumstances that COSCO had not come closer to its investment commitment, while the company’s leaders were blaming on local opposition and slow bureaucracy. Piraeus is the epicenter of the Greek shipping industry, and COSCO’s plans to build a new terminal in the port are not popular with everyone. The costly terminal project was trapped in litigation and came to a halt shortly after it began. However, recently COSCO has successfully renegotiated its contract with the Greek state to order to get up another five years to meet its investment commitment in the port of Piraeus. The request was approved by the Greece’s Court of Auditors in August and ratified by the Greece’s Parliament in September, giving COSCO with a total 67% stake in the port. The new agreement stipulates, if COSCO is unable to reach the investment target within the new deadline, it must return the 16% stake to the Greek government.
Since 2009 when COSCO started managing the port’s container terminals – II. and III. Piers – and then acquired a 51% stake in PPA in 2016, Piraeus has grown into a major transshipment hub for goods destined for Center and Eastern European countries and has become one of Europe’s largest container ports. As of August 31, 2021, COSCO Shipping had a total fleet of 1,371 vessels with a capacity of 113.7 million DWT, ranking it the No.1 in the world, with a container fleet capacity of 3.08 million TEU, ranking it the third largest in the world.
The dragon’s head
The port’s container traffic was 880,000 TEUs in 2010 which reached 3.36 million TEUs in 2015, while its global ranking increased significantly, from 93rd to 39th place. 2019 Xi Jinping visited the Piraeus Port and said that what he had seen at the port showed him that the BRI is no longer just a slogan or a tale, but a successful practice and a brilliant reality. The Chinese president also said China will further strengthen its economic ties with Greece and make the country’s largest port the “dragon’s head” which will play a key role in connecting China and Europe. The port of Piraeus had already handled a total of 5.65 million TEUs by that time, making it the most important port in the Mediterranean and one of the fastest growing container terminals in the world, able to achieve 70% growth since 2015. After another 5 years later, in 2020, this figure was 5.43 million TEUs despite the COVID-19 epidemic. The port of Piraeus global ranking in terms of traffic in European container ports jumped to No. 4 in 2020 from No. 17 in 2007 with an increase of 296% in 2020 compared to 2007. Furthermore, COSCO plans to expand the port for adding a new pier, IV. Pier which will allow the port’s annual capacity to surpass 10 million TEUs.
The EU and Greece
As we have seen, 2008 was the year when China and COSCO were able to gain interest in the Greek port of Piraeus. It seems that it was not a coincidence because that time Greece was under a great pressure by international creditors, including the EU, following the more than EUR 240 billion international bailout of the country after the global financial crisis. However, it is interesting to observe the Western and Chinese narratives about the port of Piraeus, both sides consider the case of Greece with importance, but with different perspectives.
The Piraeus deal where Greece has privatized and handed over one of their most important ports to China narrative is frequently cited by EU and Brussels as a cautionary tale for other EU members. However, the EU most of the time forget to add that the adoption of the euro and the sell-offs pressed on Athens were the major triggers. The 2016’s agreement between Greece and COSCO has heightened unrest over China’s growing role in European infrastructure in the EU which continuous in 2021, when COSCO unfulfilled its investment promises. The EU now is working a better protection for EU’s strategic sectors from Chinese influence. For this reason, in 2020, Brussels tightened procedures for screening foreign direct investment by foreign companies making acquisitions or tenders in the EU.
The Chinese narrative is considering the port of Piraeus as a real miracle and one of the most successful projects under the BRI. Which would be evidenced by the numbers of the port’s container traffic, as well as the occupation of an increasingly prominent place in various global rankings. China’s officials believe that with COSCO they made a development in Piraeus that benefits both sides and promotes better connections between Asia and Europe and build a port that the Greeks can be proud of it.
In Greece, however, the privatization of the port has generated a serious domestic political debate, and this already tense atmosphere due to the crisis has not favored to the Chinese investment. However, the Greek government has not said no to this huge investment, but it is still a major source of domestic political conflict. This and the Greek bureaucracy may have seriously contributed that COSCO not being able to complete the promised investments by 2021. From Chinese point of view the port of Piraeus named as one of the most successful BRI projects, which means the Chinese state-owned company would not have an interest to not fulfill the agreement. COSCO sees the port as a key hub, which requires further improvements in any case.
The port of Piraeus has become the largest transit port and important logistics center in the Mediterranean over the years, and at the same time has grown into the southern gateway to Central and Eastern Europe through sea and land transport. COSCO carried out massive developments and revitalize the port of Piraeus, but these aspirations met with serious resistance from the EU and fell victim to the Greek domestic political battle. It is understandable on the part of the EU and Greece because the port means to them as an incredibly important hub which connects Europe and China and now has been lost. The port is also having a great importance for Hungary because from the port of Piraeus only takes 3-4 days for seaborne goods to be transported by rail to Hungary, and it can also play an important role to transform Hungary as a transport hub with the construction of the Budapest-Belgrade railway line.
Author: Alexandra Zoltai