During an unusual visit to Greece in 2019, Chinese President Xi Jinping emphasized COSCO's investments in Piraeus port as “an important hub for China's fast land-sea link with Europe and for connectivity between Asia and Europe.”
In response to the Greek economic crisis that began in 2008, a cross-party strategy emerged, and a major component of this reform program involved the sales of the country’s crown jewel, the Piraeus port. Today, China’s COSCO owns 67% of Piraeus port stocks. To the surprise of many, COSCO has transformed this asset by modernizing its infrastructure and turning Piraeus into Mediterranean's largest port, with 1.1 million TEUs (Twenty Foot container Equivalent Unit).
The privatization of Piraeus—and China’s successful acquisition—has often been hailed in Chinese media as one of the most important deals to demonstrate the commitment of the rising superpower to establish South-South relations and partnership with other countries.
China’s Quest for a Blueprint for the Belt and Road Initiative
Years before the launch of the One Belt and One Road (OBOR) project—now called the Belt and Road Initiative or BRI, China had been looking at the Port of Piraeus as a strategic asset for its overseas economic expansion. For the Greeks, their port positions the country as the hub connecting Europe, Africa, and Asia. China has guaranteed its entry into continental Europe by using its "China-Europe land-sea express route" to move containers from Piraeus port via the Balkan railway system. Thus, Piraeus is China's entry point in the EU. By acquiring control of this asset, it completes the global route of trade, goods, and investments for the emerging economic powerhouse. As Figure 1 shows, the two Chinese commercial routes of its Belt and Road Initiative meet in Europe: the new silk road, a complex of new railways for freight trains and roads, and the more robust maritime silk road, a sea commercial line connecting China to Europe via numerous ports that China has acquired or built itself. The BRI, if viewed from an economic rationale, enables Chinese goods to bypass all the Mediterranean route to reach Northern Europe, connecting Piraeus to a modernized Balkan railway to Budapest, and thus cut the shipping times and costs.
The Greek Crisis as an Opportunity for China’s Global Engagement
China's interest in Greece's largest port predates BRI's announcement. Certainly, their long-term interest was clear even before the Greek financial crisis. Greek authorities began discussing the privatization of two major ports—Piraeus and Thessaloniki—as early as the 2000s. The critical juncture came when the IMF-negotiated bail out set in motion the plan of a fire sale of state assets to restore the international credibility of the Greek state. Yet, if we learned anything from the stories of privatization and market stabilization in Latin America, the success of the reform program has been dubious, with mixed results on macro-economic stability and generally heterogenous and disappointing growth rates. In Southern Europe, the Greek’s Piraeus deal met intense opposition from organized workers and the public. The so-called Troika austerity constraints, represented by the institutional triad of the IMF, European Central Bank and European Commission, placed significant pressures to the Greek government.
Failing to secure its international credibility in managing an economic crisis that was rapidly spreading across parts of the European Union, the Troika-backed government of New Democracy eventually collapsed amidst rising social protests. In this context, the Syriza party was elected with a promise to end the roll out of the neoliberal program. Despite its anti-austerity campaign, Syriza party ultimately failed to bring forward significant reforms it sought to deliver in the 2015 elections. Faced with enormous pressures from international financial institutions, the Syriza government quickly fell apart after a number of its MPs rejected the new austerity package. The paradox became more apparent: the government could not sustain a reform coalition and maintain credibility in the eyes of financial markets. Thus, a weaker Syriza government with divergent political agendas emerged—one marked by weak capabilities to negotiate with China.
Thus, in 2016, Greece agreed to the Troika's privatization proposals. The deal involved selling the Piraeus Port to COSCO in its third memorandum, giving up 67% of its shares by 2021. But to blame this on the Troika or China’s unrelenting pursuit of asset is misleading. Interestingly, the powerful Greek shipping conglomerates played a wider role in the privatization—a point often missed in political economy analysis. For the shipping companies, COSCO was the preferred buyer due to its enormous capital backing from the Chinese government. Besides that, COSCO was already present in Piraeus since 2008, when it first bought and modernized Containers Terminals II and III. As the Figure 2 shows, between 2011 and 2016, COSCO managed to triple the capacity of Terminal II and III.
COSCO’s bid in making Piraeus the Mediterranean’s most important commercial hub was key for securing the deal. A strong alliance with the Greek Shipping Chamber emerged, in which the Greek capitalists assisted COSCO to secure the sales of Piraeus in exchange of several benefits. For one, COSCO’s rapid modernization plan would enable Greek shipping capitalists to increase their cargo for container ships in the China-Europe route, thereby improving profit margins and expanding their business routes. COSCO also has a pricing system for their orders in Chinese shipyards. Greek shipowners became the most important customers of Chinese shipyards in the 2000s, with Greek-owned fleets accounting for roughly 50% of Chinese exports and imports to Greece. Greek shipowners have ordered approximately 500 vessels from China since 2000, with 155 already delivered. To achieve this, the Chinese government pushed for measures to create an attractive environment for potential clients, ranging from simple finance facilities to secured multi-year chartering to Chinese operators.
Greece between a rock and a hard place
The post-privatization arrangement has left the Greek state in a trilateral relationship between China, the United States of America, and the European Union. On the one hand, the Greek state had to reassure the Americans that the deal was purely economic, with limited compromise on national security concerns. On the other hand, pressures from the European Union to privatize the state has widened the rift between Greece and the wider continent. In fact, a study by Centre for European Policy Analysis (CEPA) shows that the final deal in 2016 is simply symbolic rather than an assertion of Greek’s ‘strategic autonomy’ from Brussels. In this complex triad, China appears to be the big winner. China has secured a new trade route, enabling the flow of important goods from China to Europe via the Greek port.
As the strategic competition between China and the US intensifies, some qualifications must be made on how this deal impacts geopolitics on the ground. To start with, negative views on the Piraeus deal appears to be part of a larger media attack rooted on China's engagement in Europe. As one interview pointed out, “it was a market transaction that underwent significant review and a transparent process of bidding among key financial institutions in Greece.” Perhaps more importantly, China’s access in Greece is in fact limited when compared with the cumulative levels of FDI flowing from the West to Greece (Figure 3).
China’s access to the Greek economy is equally confined within specific sectors, mostly concentrated in shipping and infrastructure, and to a less extent, real estate in Athens. China's current foreign policy of neutrality in the Ukraine war and growing tensions in US-China relations have both constrained the Greek government from making headways in establishing long term economic and political ties with China. Furthermore, Greek’s historical ties and military dependence to the US is likely to be an obstacle to deepen China-Greek relations (CEPA).
Resistance and Critics from the Margins
A final point is worth pointing here. Beyond the geopolitical realignments based on high politics and ‘economic security’ concerns, local resistance has been growing. There are now organized communities and worker's unions who have questioned the positive role of COSCO in developing the port. We interviewed some of these communities and we found multiple grievances. Their concerns vary widely—from unfair compensation and unfulfilled promises to the need to protect the erosion of workers rights’ or meet the environmental safeguards to protect the surrounding neighborhoods in the port. All these mean that China’s successful blueprint for infrastructure building and diplomatic cooperation with less powerful countries needs to be revisited. And, crucially, the early successes could turn into failure if engagement with multiple stakeholders is not sustained.