With the sale, China’s state-owned COSCO aims to turn a once-sleepy port into the “dragon’s head” of the New Silk Road.
Beijing’s ambitions to build a modern-day “Silk Road” connecting China, Central Asia, and Europe took a big step forward Friday when Chinese state-owned shipping giant COSCO finally sealed a deal to purchase the Greek Port of Piraeus, south of Athens.
For COSCO and for Beijing, it’s a billion-dollar conclusion to a seven-year saga. COSCO, formally known as the China Ocean Shipping (Group) Co., took over operations at one part of the Port of Piraeus in 2009, and had long wanted to take ownership of the whole port, one of the biggest in the Mediterranean. But the port’s privatization was put on hold for a year because Greece’s left-wing leadership bitterly opposed earlier plans to do so by the previous government. On Friday, COSCO agreed to acquire control of the port and to spend hundreds of millions of dollars more to continue upgrading and modernizing Piraeus.
In classical Greece, the “long walls” connecting Athens to the Port of Piraeus were the city’s lifeline, protecting it from hostile armies and ensuring Athens’ regional supremacy. Today, Piraeus could again be a lifeline for Greece, helping attract billions in foreign investment and turning a backwater into a global hub.
China’s so-called “One Belt, One Road” initiative is a grand, double-barreled blueprint to deepen trade ties across Eurasia, the Indian Ocean region, and Europe. It includes roads, rails, and pipelines across Central Asia, and port development in places like Sri Lanka, Pakistan, and Greece. The “One Belt, One Road” plan is backed in part by the $100 billion Chinese-led Asian Infrastructure Investment Bank and the $40 billion New Silk Road fund.
The sprawling, ambitious plan is plainly about economics — especially streamlining trade — but also about boosting China’s global reach and influence. The purchase of Piraeus could do both.
The Chinese ambassador in Greece, Zou Xiaoli, hailed the port deal in a speech last month as a “once-in-a-thousand-year opportunity” for China and Greece to jump-start trade and development, part of a “comprehensive strategic partnership between China and Greece.” He called Piraeus the “dragon’s head,” or the vanguard, of China’s efforts to build a new network of shipping and rail links that can speed trade in commodities and finished goods between China and Europe.
COSCO’s chairman, Xu Lirong, couched the deal in terms of classical Greek heroes like Jason and the Argonauts. “Let the ship sail and bring the Golden Fleece,” he said, according to Reuters.
“Piraeus is very important not just because it’s a gateway to Europe in general, but specifically to Central Europe, now the core area of industrial production,” said Frans-Paul van der Putten, a China expert at the Netherlands Institute of International Relations, who has written extensively about China’s New Silk Road and how it affects Europe.
The next step in turning Piraeus into the European hub of China’s new Silk Road involves better connecting southern Greece with the Balkans and Central Europe. And that means modernizing rail connections. COSCO is reportedly interested in snapping up the Greek railway system, which is also set to be privatized. Doing so could transform the Port of Piraeus into a key corridor linking Germany, Central Europe, the Indian Ocean, and China, van der Putten said.
China’s slow but steady progress in using mostly state-owned companies to knit together key trading hubs contrasts with Europe’s sluggish pace at advancing its own plans for better connections between markets. The European Union, for instance, hopes to link several transportation corridors within Europe to streamline trade and more closely integrate far-flung regions.
One such route, the Orient-East Med corridor, is meant to link German ports on the Baltic Sea with big rail hubs in Central and Eastern Europe and, ultimately, Piraeus — facilitating trade flows between the EU’s heartland and its periphery. But little concrete progress has been made on that corridor, while COSCO has already transformed Piraeus from a sleepy port into one of Europe’s busiest.
Top 20 container ports in 2014 – on the basis of volume of containers handled in (1000 TEUs(1))
“The Greeks don’t count on that EU initiative, they’re counting on the Chinese initiative,” van der Putten said.
Beijing’s nuts-and-bolts approach to deepening trade ties and broadening its geopolitical influence also contrasts with the U.S. approach to trade. Washington, too, sought to promote a “New Silk Road” that could boost the economies of troubled states in Central Asia and help bring stability to the region, but that plan went nowhere. Now, policymakers in Washington cheer China’s big investments in the same region.
The United States is also looking to big, multilateral trade accords like the Trans Pacific Partnership, or TPP, and the Transatlantic Trade and Investment Partnership, or TTIP, to boost its own influence in Asia and Europe and counter Beijing’s growing economic and geopolitical heft. But TPP faces an uncertain future in Congress, and TTIP negotiations are moving slowly.
Meanwhile, Chinese companies like COSCO are building, one cargo crane at a time, deeper economic and political ties between Beijing and the rest of the world.
By Keith Johnson