Silk Road Headlines_1st March, 2019

Setback and Success for China in Piraeus

COSCO is going through some challenging times in Piraeus. Greece’s port regulator cancelled part of a $650m investment masterplan for Piraeus Port Authority (PPA) [Cosco Shipping's investment plans for Piraeus port rejected]. The masterplan has two pillars: the mandatory projects in the port agreed with Greece when COSCO took over the port, and a voluntary ‘side’ investment programme that includes plans for a cruise terminal, hotels, and a logistics centre.

The cancellation mostly concerns this voluntary investment program, investments in the port itself are allowed to continue. COSCO however says the masterplan cannot be split in two, and that cancellation of one part means cancellation of the entire plan.

The port regulator says the cancellation was based on environmental impact studies. But in reality, pushback by local companies, fearing competition from COSCO, appears to have played a large role as well. Another intriguing possible reason can be found in Athens, where ruling party SYRIZA has allegedly pushed for the cancellation in a bid to pressure China to move on with a long-delayed $8 billioninvestment plan for the old Hellenikon International Airport site [SYRIZA Ministry Kills Chinese Company’s $580M Piraeus Renovation].

This mega project includes hotels, a casino, retail areas, and a conference centre, and was expected to create no less than 75.000 jobs. The project was approved in 2017, to be carried out by a consortium led by Shanghai-based Fosun Group. This company has been operating in Greece for a while, but so far without much success.

Whatever the exact reason may be, the PPA itself is doing well, and COSCO is expanding its operations. The biggest good news came with one of the largest container ships in the world; the COSCO-owned 20,000 TEU Shipping Pisces docked in Piraeus on Friday February 15, on its maiden voyage from Shanghai, underscoring the importance of Piraeus for the company. A week earlier, PPA reached an agreement with the Italian ports of Venice and Chioggia, agreeing to develop port services and increase trade.

Interestingly, this agreement appears to compete directly with China’s involvement in the Italian port of Trieste, just 120 kilometres away across the Adriatic Sea, headed by state owned China Communications Construction Company (CCCC). However, CCCC is facing some difficulties there due to Trieste’s complicated international status [How Trieste could become the Singapore of the Adriatic]. So perhaps China is just hedging its bets.

In the end, COSCO and the port authority are likely to find some sort of compromise for their mostly economic disagreement. Piraeus doesn’t want investments to go away, and COSCO doesn’t really want to get out. The Hellenikon Airport problem may be trickier to solve, with politics as well as economics involved.
 

By Clingendael