China’s Growing Influence in Italy and Greece
Italian President Sergio Mattarella receives Chinese President Xi Jinping in Rome. (Photo: China Daily)
By Anita Inder Singh

China’s Growing Influence in Italy and Greece

Apr. 29, 2019  |     |  0 comments


China’s economic influence is expanding in Europe’s Mediterranean area. Two West European countries in the European Union (EU) — Italy and Greece — joined China’s Belt and Road Initiative (BRI) in March and April, 2019 respectively. Both are also part of the Eurozone and NATO, and Italy belongs to the Group of Seven, which represents more than half of the world’s wealth. Their joining the BRI soon after the EU labeled China as a “systemic rival” in March — and shortly before the EU-China summit on April 9 — simultaneously mirrors the divisions in the EU’s foreign policy. Significantly, Italy abstained from the recent EU vote to screen foreign investment in Europe.


A major Chinese economic activity in the two Mediterranean countries will center around the development of three historic ports – Trieste in north-east Italy, Genoa in the north-west, and Piraeus in south-east Greece, in the Athens area.


Among the deals signed during President Xi Jinping’s visit to Italy in March 2019 was an agreement between the Trieste and Genoa port authorities and the China Communications Construction Company, which is the BRI’s largest builder. The opening of more Italian ports to China has also been under discussion.


China’s “port diplomacy” with Italy and Greece predates the BRI. China and Italy also view the deal through a historical perspective. In the 13th century, the Venetian explorer Marco Polo travelled along the Silk Road to China. In more recent times, China and Italy have strengthened industrial ties. Since the 1980s, Italian and Chinese companies have promoted joint ventures in several areas including mechanics and financial credit. Italy’s economy has yet to recover from a decade of slowdown and its infrastructure investment is still 40 percent below the peak it had reached in 2008. Therefore, Chinese funding for the Trieste and Genoa ports is welcome and important to Italy.


For Italy, the Trieste deal would open the country to more Chinese infrastructure investment,

For China, Trieste is a gateway to Europe. Its ability to handle port container traffic has greatly increased.


Centuries ago, Trieste was an important port city at the northern edge of Italy’s Adriatic coast. It connected several empires. Contemporary Trieste is strategically important for Beijing because it would link the Mediterranean to landlocked Central and South European countries, including Austria, Hungary, the Czech Republic, Slovakia and Serbia, all of which are potential markets that China is trying to reach and develop with the BRI. A foothold in Trieste would give China a faster trade route and railways to the rest of Europe.


China’s investment in the old Greek port of Piraeus started in 2008, five years before the launch of the BRI. The history of Piraeus goes back to the fourth or fifth century BC, when the Athenians recognized the strategic importance of its deep water harbor and converted it into a military harbor. In the 21st century, as in ancient times, the port is of great commercial and strategic significance.   


When the state-owned China Ocean Shipping Company (COSCO) began developing the Piraeus port in 2008, Greece was facing bankruptcy. Piraeus was then considered insignificant and many in Europe took the view that Greece could benefit from China’s investment. Eight years later, in 2015, COSCO bought a majority stake stake in the Piraeus Port Authority through an agreement that is valid until 2052. Today, Piraeus is one of the largest passenger ports in Europe. About 20 million passengers use it every year. COSCO plans to increase its investment with the intent of turning the port into a hub for rapidly growing trade between Asia and Eastern Europe.


Since COSCO’s takeover, Piraeus has become the fastest growing port in the world, according to a report in the German newspaper Die Zeit. It could displace the German port of Hamburg from the third place in Europe. Trade traffic increased after the Chinese takeover and in 2017 Piraeus showed a 92 percent profit. COSCO aims to make Piraeus the largest port in the Mediterranean.   For both China and the EU, Piraeus marks increased connectivity between continents. Having joined China’s 21st Century Maritime Silk Road, Greece aims to expand its links with commercial centers in Europe, Africa, Asia, and beyond.   



EU policy towards China’s growing clout in the Mediterranean tells a familiar story of its disunity. Lacking a common defense policy, the EU is more concerned with economic issues.



China, meanwhile, is the EU’s biggest source of imports and its second-largest export market, adding up to more than USD 1 billion in trade per day. China’s blue economy accounts for 10 percent of its GDP. And the value of China-EU sea trade greatly exceeds trade by air or rail.   


But China’s efforts to increase maritime ties with Italy and Greece are more than trade. Its strategic interests also explain its attempts to develop important Mediterranean ports like Trieste, Genoa and Piraeus. Two facts stand out. 


First, in the 21st century, “great power” will be defined to a considerable extent by maritime power and connections. That is one reason why China is building up a blue water navy. China’s BRI reflects the intertwining of its economic, trading and military power. That was highlighted in 2015, when President Xi Jinping announced that military-civilian integration had been raised to a national strategy. As a rising power, China’s integration of its military and civilian areas would boost its economy and strengthen its defense sector.


That raises the question whether China might develop Trieste and Piraeus for military purposes.  In the Indian Ocean, for instance, Chinese investments in the ports of Djibouti, Sri Lanka and Pakistan have been followed by Chinese naval deployments. In July 2017, Chinese warships paid a “friendly” visit to Piraeus and carried out naval drills with the Italian navy.

 

Secondly, China’s interest in Trieste, Genoa and Piraeus highlights its strategic concerns in the Mediterranean. Sixty percent of Chinese exports travel by sea, and the Mediterranean route to Europe is the most direct route and less expensive than land and air routes.


But the Mediterranean is a politically risky area for China. NATO has a strong naval presence in the Mediterranean Sea, which is sometimes referred to as “NATO’s lake”. The region is also prone to conflict, especially in Cyprus, in and around Israel and North Africa. Export-dependent and energy-hungry China would want to ensure that its goods will reach their intended markets and that no adversary will be able to block its oil supplies through a naval blockade. All told, there is more to the BRI than trade, as China builds its blue-water navy and holds naval drills in the Mediterranean, not only with Greece and Italy but also with its strategic partner Russia.


EU policy towards China’s growing clout in the Mediterranean tells a familiar story of its disunity. Lacking a common defense policy, the EU is more concerned with economic issues. Unable to agree on foreign policy, EU countries differ on their estimates of Chinese economic power and its potential threat to Europe. Greece itself sees benefits in joining the BRI and in having allowed China to develop Piraeus. And China has gained diplomatically from its good ties with Greece. In 2017, Greece vetoed an EU statement critical of China at the UN Council on Human Rights.  


For the EU, the awkward question is whether Beijing has acquired political influence in Athens by developing Piraeus. The economic and strategic implications of Italy and Greece joining the BRI trouble the EU. But it has yet to decide how it wants to deal with China’s growing influence. In September 2017, a worried EU leadership suggested new investment screening measures for foreign state-owned companies wanting to buy a European harbor, part of the EU’s energy infrastructure or a defense technology firm. But there is no EU-level policy on ports.


China’s port diplomacy in Italy and Greece shows how it has simultaneously built up its influence in Mediterranean and enhanced its own commercial and strategic position. The EU’s recent talk of “systemic” rivalry is strangely aligned with its wish to deepen its ties with China. The outstanding fact is that the EU is too economically dependent on China and too divided to prevent more west European countries from joining the BRI. (Monaco and Luxembourg are also on board). The participation of Italy and Greece in the BRI, the development of the ports of Trieste, Genoa and Piraeus, signal greater cooperation between Italy, Greece and China. How the EU will deal with China’s growing influence in the Mediterranean and Europe remains the open and tough question.



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