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Chinese overhaul of Greek port opens gateway to Europe

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Monday, July 8, 2019 – Page A1

PIRAEUS, GREECE -- The union members were shouting, "No more workers' blood!" at a protest at the Port of Piraeus, just outside Athens, on a warm weekday morning in late May. A worker had been killed in a scaffolding accident two days earlier, and the Metal Workers Union of Attica was directing its anger at China COSCO Shipping, the Chinese state-owned logistics giant that controls the port.

Was the Port of Piraeus, notorious for crippling strikes and protests until the last decade, once again turning into a hotbed of dissent?

If anything, the protest proved the opposite.

It was small - maybe 100 workers showed up - and a rarity.

Chinese and Greek government officials consider Piraeus, which was a broken-down mess of a port for decades, a showpiece investment in the Belt and Road Initiative (BRI), Beijing's infrastructure-based global development strategy that is sometimes known as the New Silk Road.

Under Chinese ownership, Piraeus has emerged as the second-biggest container port in the Mediterranean and Europe's biggest passenger port.

It has allowed China to establish a firm foothold in a prominent European Union and NATO country, one that could be used to extend Chinese influence throughout the Mediterranean countries and into the Balkans.

The port's success may be too much of a good thing for the White House and for the EU strategy officials in Brussels, as rivalries between China and the West take on the flavour of a new cold war. Already, there are rumours that a recent freeze on further port development by COSCO, which is ultimately controlled by the Chinese Communist Party, was the result of back-channel U.S. and EU pressure.

In March, the EU labelled China a "systemic rival," marking a hardened tone on Beijing's ocean-hopping industrial and security ambitions. Chinese naval vessels have been welcomed at Piraeus, a sight that must be anathema to the White House and commanders of the U.S.

Sixth Fleet in the Mediterranean.

Piraeus is generally viewed as a winning investment by COSCO, the Greek government, the shipping companies and economists.

"The Chinese made Piraeus competitive," said Miranda Xafa, a Greek economist who is a senior fellow at the Centre for International Governance Innovation and a former member of the International Monetary Fund's executive board. "Jobs there used to be inherited. They used to retire at age 50 with lump-sum payments. No more. This is a privatization that has worked."

But COSCO is suddenly no longer getting a free ride in Piraeus. In April, without warning, Greece's powerful Central Archaeological Council and Museums (KAS) declared much of Piraeus an archeological site. The decision froze big portions of COSCO's plan to invest another 600-million ($880.9-million) in Piraeus with the addition of luxury hotels, a shopping mall, warehouses and a very expensive cruise-ship terminal. In early July, Greece's Port Planning and Development Commission conditionally accepted, but did not approve, COSCO's expansion plans.

The expansion may go nowhere until well after Greece's snap election on July 7. On Sunday night, results showed the ruling radical-left Syriza party headed for defeat at the hands of the opposition conservatives. New Democracy is expected to support additional Chinese investments in the Port of Piraeus.

As a matter of pride, Greeks tend to be highly political - and a few are prone to conspiracy theories. Some say the Americans encouraged the Greek government to put the brakes on COSCO's expansion plans, although there is zero evidence to support this theory. In early June, a small but well-known Greek newspaper, Liberal, implied that the KAS decision was indeed political. "The government, in doing a favour for the U.S.A., has come up with so-called archeological obstacles in Piraeus," it said.

The timing was certainly curious. The KAS decision came just after China welcomed Greece into the club of Central and Eastern European countries, 11 of them EU members, known as the 16+1 group (the 1 being China). It is now the 17+1 group. Greek Prime Minister Alexis Tsipras, who once opposed COSCO's presence in Piraeus - as some of his radical-left Syriza party members still do - has since become an enthusiastic backer of the shipping giant and the BRI and has made three visits to China since becoming Prime Minister in 2015. If the KAS decision sticks, a diplomatic row is inevitable, and the Chinese embassy in Athens is already demanding answers.

The Port of Piraeus stretches almost 30 kilometres from the ferry-passenger and cruise-ship terminals in the heart of gritty Piraeus to the ship repair yard to the northwest.

The waters just off the port were the site of the first great naval battle in recorded history. In 480 BC, during the Greco-Persian wars, Greek triremes crippled a much larger Persian force in the strait between Piraeus and the island of Salamis.

Since the 19th century, Piraeus has been instrumental to Greece's development. The Piraeus Port Authority (PPA) was established in 1930, and Pier 2, the port's biggest container terminal, was completed in 1997.

Five years later, the PPA joined the Athens stock exchange, although the government kept a majority stake.

During those years, the port was, by all accounts, barely functioning. "Before COSCO got there, it was a congregation of wasp nests," said Konstantinos Katsigiannis, the Athens lawyer who is president of the HellenicCanadian Chamber of Commerce. "There were strikes, demonstrations and clashes - you name it. It was unbelievably inefficient and crooked." Nektarios Demenopoulos, the deputy manager of public and investor relations for the PPA, remembers that some dockworker strikes were, by design, so severe that they could trigger economic hardship in Piraeus and Athens.

"Strikes used to be a very big problem because the unions had monopoly power to close the biggest port in the country," he said.

"Sometimes the supermarkets had a deficiency of products because of the strikes."

By 2008, the Greek government was fed up with the strikes and the decrepit state of the container port, whose main pier was running at half-capacity, and Athens faced a crippling financial crisis that would prevent it from investing in Piraeus.

The port's two biggest container operations - Pier 2 and Pier 3, the latter only partly constructed - were put up for auction. The long-term lease was won by a COSCO company called Piraeus Container Terminal. The Chinese revolution at Piraeus was about to begin even before "Belt and Road Initiative" had entered into the global development lexicon. The takeover of the piers would launch one of China's biggest investments in Europe.

Kriton Valleras, adviser to the General Secretariat of Ports of Greece's Ministry of Maritime Affairs and Insular [Island] Policy, said the piers had enormous potential as a key destination for cargo ships arriving from Asia through the Suez Canal. "The piers needed a lot of improvement," he said.

COSCO sunk about 600-million into Piers 2 and 3 to make them among the biggest and most automated in the Mediterranean and a hub for transshipment - the transfer of containers from large vessels to smaller ones so the cargo can be sent to smaller ports. Unlike many BRI projects around the world, no "debt trap" was created for the Greek state - the funds were raised and spent by COSCO, not loaned to Greek agencies.

The overhaul has turned the port's container operations into a competitive force.

In 2007, Piraeus did not rank among the top 15 Mediterranean container ports. By 2017, it was eighth, measured by the total throughput of 20-foot equivalent containers, known as TEUs, according to data from Europe's PortEconomics site. Last year it had climbed to sixth position, behind Valencia, Spain, with a throughput of 4.9 million TEUs.

COSCO officials boast that Piraeus will surpass Valencia by the end of this year and keep on going, although the top three ports - Rotterdam, Antwerp and Hamburg - are so big they seem unassailable.

Today, the Piraeus container port sees, on average, 7.5 ship arrivals a day, some of them greenhulled monsters from China Shipping Container Lines. The port's towering cranes - 31 at last count - can unload 4,000 containers in 24 hours. The newest cranes remove two 40-foot containers at once, lifting them side by side. Last year, Piers 2 and 3 reported a net profit of 44.1-million on revenues of 56.2-million - this is a business with high profit margins. The smaller Pier 1, under separate control within the COSCO group, is losing money.

COSCO claims the Piraeus container port has not lost a day of work to industrial action since it first invested in the vast operation in 2008. Yes, there have been strikes by dockworkers, as there were last year, but none was big enough to cripple the port. "We proudly say we have offered uninterrupted services for the last 10 years," said Tassos Vamvakidis, the commercial manager for the container port.

COSCO got lucky about four years ago when the Greek gov-

ernment, under pressure from the European Commission, the European Central Bank and the International Monetary Fund - the "Troika" overseeing the Greek bailouts - insisted that Greece ramp up its privatization program. Part of that effort would see the rest of Piraeus privatized, including the ferrypassenger, cruise ship, ship repair and car terminals, all of which were held under the PPA.

The privatization effort triggered a crisis in Greece, whose governments have long opposed privatizations, as did the unions, which considered them an invitation to mass layoffs and nonunionized workers. "There were lots of strikes at Piraeus in response," said George Pagoulatos, a political economist and vicepresident of the Hellenic Foundation for European and Foreign Policy (ELIAMEP). "It was a typical left-wing reaction to the privatization of a strategic asset."

But Greece was desperate for foreign investment, and the privatization went ahead. In 2016, COSCO bought 51 per cent of the PPA for about 300-million. It has the option to raise its stake to 67 per cent once it completes some 293-million of "mandatory investments," the biggest being the expansion of the ferrypassenger port (136-million) and the overhaul of the ship repair yard (55-million). Many additional investments, including the hotels and the cruise-ship terminal, are in limbo because of the KAS freeze on their development.

The takeover of the PPA has not made everyone happy. The unions have complained that COSCO is loading up with nonunionized workers (the company declines to say what the split is between unionized and nonunionized workers). The Association of Passenger Shipping Companies has complained about the lack of COSCO investment, so far, in the ferry terminals. "Nothing has been done for the ferries," association president Michalis Sakellis said. "We don't talk much to COSCO."

And the job-creation numbers, while encouraging, are hardly breathtaking. Mr. Demenopoulos, the PPA's public and investor relations manager, said the port, excluding the core container business, had 1,700 employees a decade ago. Today, the number has fallen to a little more than 1,000. But the container business has created 2,000 new positions since COSCO leased Piers 1 and 2 in 2008.

Mr. Pagoulatos, the ELIAMEP economist, said COSCO's investment in Piraeus has been a big win over all for Greece. "It was a very positive investment," he said. "It turned Piraeus into one of the largest shipping centres in the world, a great opportunity for Greece."

The investment may be buying more than piers and cranes.

In 2017, a year after COSCO took majority ownership of the PPA, Mr. Tsipras's government vetoed an EU condemnation of China's human-rights record at the United Nations. The government denied the veto was payback for the Piraeus investment.

Certainly, China seems to be digging its economic claws into Greece by going after strategic investments. In 2016, China State Grid, the world's biggest utility, bought 24 per cent of Greece's power grid operator. China is one of the main backers of the redevelopment of Athens's abandoned Hellinikon international airport, an enormous project that has been stalled for years.

COSCO is said to be considering the purchase of other Greek ports and has signalled that ports in Italy - which this year officially joined the BRI, the first Group of Seven country to do so - will be next. The success of the Piraeus investment will certainly burnish China's lobbying power in Italy, the euro zone's third-largest economy.

Mr. Pagoulatos says the BRI investments in Greece and elsewhere in Europe are part of China's plans to raise its global political clout. "China wants to retain their trade flow and they will couple it with political influence so that these markets do not get closed to them," he said.

Greece is still anchored to the EU and has been kept intact within the euro zone with copious amounts of European bailout money. But its affection for China is growing and, at some point, that is bound to set off alarm bells in Washington and Brussels, if it hasn't already. If a full-blown cold war does erupt between China and the United States, Greece's allegiance may not be easy to predict.

Associated Graphic

China has sought economic footing in Greece by going after strategic investments. Greek Prime Minister Alexis Tsipras once opposed China COSCO Shipping's presence in Piraeus, but he is now an enthusiastic backer of the shipping titan, as well as China's Belt and Road Initiative. Since becoming Prime Minister in 2015, Mr. Tsipras has made three visits to China, including one seen above.




China COSCO Shipping has invested about 600-million ($880.9-million) into Piraeus's Piers 2 and 3, making them among the largest in the Mediterranean. The piers are also a hub for transshipment, which involves moving containers from large vessels to smaller ones so cargo can be shipped to smaller ports.


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