Τετάρτη, 17 Μαΐου 2017

The Geopolitical Significance of Piraeus Port to China

COSCO, the Chinese state-owned company has been operating the Greek container port since 2008. In April this year it acquired 67% of its shares. The agreement is important both for Greece and China, due to stimulating the Greek economy and its role in the Chinese New Silk Road initiative. By purchasing the busy port, China can connect its maritime trade routes crossing Southeast Asia and running along the shores of Africa with the cities of Europe.

Bridge to Europe
Within the framework of China’s “One Belt, One Road” policy, China tries to intensify its relationships with the countries which once lay along the Silk Road, or near its route and are important from China’s viewpoint. In the network, which is divided into several continental and maritime routes, the so-called 21st Century Maritime Silk Road is important to Greece. 

It starts in China, crosses Southeast Asia and India, and after having passed the eastern coast of Africa and crossed the Red Sea, arrives in Europe, in the Greek port city of Piraeus, which has had key importance in history. The European Union is China’s most significant commercial partner, thus ensuring trade routes has obvious advantages for it. 

The ports of Greece mean a direct route onto the continent, especially if the planned railway connecting the port with Beograd and Budapest is built.  China has ambitious plans concerning the region, but first the route into it must be provided, and its European “gate” is Piraeus port.

Details of the Agreement
The China Ocean Shipping Company (COSCO) purchased Piraeus port in Greece in the spirit of the Maritime Silk Road plan. State-owned COSCO is the world’s fourth largest container shipping company and the second largest port operator.[ii] The antecedent of the agreement is a contract concluded in the presence of General Secretary Hu Jintao in 2008, in which the Chinese party acquired the management rights, but not the ownership, of two of the three container terminals at the Port of Piraeus for thirty-five years. The agreement included provisions about the construction of a new dock, with new cranes installed, increasing the annual container traffic to two and a half million. The cargo volume of two container terminals operated by China exceeds the one left under Greek management, the capacity of which is not used properly, and which is obsolete compared to the Chinese one. Since 2009, the cargo volume of the container terminal has increased fivefold, and general commercial activity has tripled.

The new agreement was signed in the presence of Stergios Pitsiorlas, the President of a privatization fund named Hellenic Republic Asset Development Fund, Feng Jinhua, Cosco’s financial executive, Alexis Tsipras, the Prime Minister of Greece and Xu Lirong, the President of COSCO on 8th April, 2016. The amount agreed is €8 billion, which includes €500 million dedicated to building new facilities in the port, an annual fee payable to the Greek state, future investments and the interest to which Greece will have access later. China has acquired 67% of the state-owned company named Piraeus Port Authority.

The Greek Viewpoint
Although Greece’s left-wing government objected the privatization in principle, the country had to comply with the conditions of the third bailout package and by 2016 they have to reach the 4 billion privatization threshold. Because of the objection from the government and the mayors of Piraeus the business was divided into two. Upon signing the agreement, COSCO received 51% of the company, and will receive the remaining 15.7% in January 2021 once it has completed the planned investments.[iii] In return for the privatisation, COSCO commits itself to investments worth at least €350 million in the next ten years in order to upgrade the port. These include the construction of a multi-story garage, a cruise port and a shipyard repair zone.

Greek people, however, could not see only the opportunities in the agreement. The Chinese takeover of one of the most important ports in history evoked strong reactions. Local people felt aggrieved at the fact that the country would lose control over an extremely important area.[EV4] In Athens the workers of the docks went on a strike, disrupting the work of the container terminal. They felt the agreement was jeopardising their livelihood.

Prospects
According to some estimates, Piraeus may become the largest port of the Mediterranean region by 2020, but the purchase of the container port may be dwarfed by the planned investments and developments. The objective of the further infrastructural developments planned is to intensify the commercial relations between the region and China. In the near future, the countries along the Road will be connected by way of railways, roads and pipelines.  China will develop ports on Sri Lanka, in Pakistan, Bangladesh and Kenya – all being parts of the project. The expansion of the Suez Canal will also greatly facilitate trade in the region. The port of Piraeus will also fit in this system, and is extremely important because it would connect the maritime section of the Silk Road with the continental one. The Chinese already expressed their intention to invest in the Greek state railways as well, and the acquisition of the port of Thessaloniki is also on the agenda, and may be realised in 2017.

Despite the miserable state of Greek economy, the country is a valuable partner to China. Greece has the largest fleet of commercial vessels, and 60% of China’s export goes through the country. In addition to the agreement on Piraeus, Chinese banks provide loans to the Greeks to enable them to have ships made in China. They also cooperate in maritime research and development programmes at their universities. Another state-owned company, Fujian Shipbuilding Trade Company, is active in the region: the agreements made with the Greeks created 190,000 workplaces, and Beijing could obtain new technologies through them. China has invested nearly US$7 billion into the development of the port of Athens, and $1 billion into the construction and operating of the airport on Crete. Greece-bound tourism has also increased: 70% more, that is, more than 100,000 Chinese tourists visited the country in 2014.

The port of Piraeus, as well as the Greek airports present an excellent opportunity to China to get a foothold in Europe. As part of the Silk Road scheme, the construction of a railway connecting the port and Central Europe is also planned, which would be jointly funded by the European Union and China. With this new, high-speed railway the distance between Budapest and Beograd would be covered twice as fast, and, according to the plans, it would be completed by 2017. Upgrading the commercial routes of the region could not increase only Greece’s GDP but the infrastructural investments will have a positive impact on the economies of the countries in the region, including Hungary, as well.  Trade with European countries, and ensuring the routes it requires, is one of China’s priorities. This is why the acquisition of the port of Piraeus is so important.

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