China's Mediterranean Odyssey

http://thediplomat.com/2016/04/chinas-mediterranean-odyssey/

China has bought Greece’s Piraeus port, but how realistic is Beijing’s Mediterranean dream?

By Elodie Sellier, April 19, 2016

“Let the ship sail and bring the Golden Fleece,” said China Ocean Shipping Company (COSCO) Chairman Xu Lirong on April 8, after the state-owned shipping giant sealed a deal to purchase the Greek port of Piraeus, southwest of Athens. Beyond the romantic evocations of Greek heroes such as Jason and the Argonauts, this “made in China” golden fleece amounts to no less than a 368.5 million euro (around $420 million) deal, signed by COSCO with Greece’s privatization agency, and the promise of another 350 million euros in investment over the next decade.

China is increasingly sailing West, multiplying offers to European partners under its grand strategy of reviving the Silk Road routes. To Beijing’s eyes, the purchase of Piraeus is a major leap forward in its “Belt and Road” project, a sprawling network of infrastructure development and investment that aims at building “a new bridge of friendship and cooperation across the Eurasian continent,” as President Xi Jinping has put it. Ultimately, China aspires to tie together the dynamic economies of the two extremities of the Silk Road, East Asia and Western Europe.

Strategically located at the other end of the Maritime Silk Road, Greece could be China’s “gateway to Europe,” Premier Li Keqiang stated in 2014. But how realistic are China’s projects in the Mediterranean Sea? Can China pursue its “Mediterranean Odyssey” and enter the European market while maintaining a “hands-off” approach to the political and security challenges that undermine the stability of the region?

China’s Piraeus success story

So far, the Piraeus adventure has been a success story for China. Since 2009, when COSCO obtained a concession to operate a two-container terminal for a period of 35 years, its container throughput has increased five-fold and business activity has tripled, laying the ground for the transformation of the port into a major hub in the Mediterranean. In 2014, the Greek port handled no less than 16.8 million passengers and 3.6 million 20-foot equivalent units (TEUs) of containers.

With the purchase of Piraeus, Beijing seeks to increase the synergies with the terrestrial belt of the Silk Road, which stretches from China to Central Europe through Kazakhstan and Eastern Europe. Ultimately, Beijing aims to knit together all the countries along the Belt and Road through a complex network of roads, rails, and pipelines. The new ports built in Sri Lanka, Pakistan, Bangladesh, and Kenya, which form part of the “string of pearls” spreading from the coast of mainland China through the South China Sea, the Strait of Malacca, across the Indian Ocean, and into the Arabian Sea and Persian Gulf, not only operate as strategic outposts along major sea lines of communication (SLOC), but also provide the basis for the construction of new railways that extend from these ports into the interior of the host countries.

China’s modernization program at Piraeus follows a similar logic. The successful growth of the Piraeus container port led by COSCO has created the basis for developing infrastructure connections with other parts of Europe, from Athens to the Balkans and Central Europe. In the words of Chinese Ambassador to Greece Zou Xiaoli, the raison d’être of the Sino-Greek collaboration is “to build the China-Europe Land-Sea Express Route to connect the maritime Silk Road with the Silk Road on land.” China has already expressed deep interest in investing in Greece’s national rail network TRAINOSE, and has recently floated the idea of purchasing the port of Thessaloniki, which is scheduled to be privatized in 2017.

China’s enthusiasm echoes that of a crisis-ridden Greece bending over backwards to meet the demands of international creditors, and in desperate need for some short-term cash to offset an unemployment rate at 24.4 percent. “I hope that this deal is just the beginning for many more investments to come to Greece,” said Greek President Prokopis Pavlopoulos on April 9, expressing the belief that Chinese investments will help the country alleviate its enormous debt.

A sea of opportunities?

Increasing ties between China and Greece, and to a larger extent between China and Europe, are giving the Mediterranean region an opportunity to regain its place in the world. As French historian Fernand Braudel once put it, “the Mediterranean is not a border, but a place for trade.” This opportunity is compounded by the rapid growth of north African economies, which have become key suppliers to China and a growing market for Chinese and European goods. Meanwhile, the enlargement of the Suez Canal in 2015 has doubled the traffic flow between the Red Sea and the Mediterranean Sea, allowing for the transit of larger vessels and reducing transit time between Asia and Europe, and raising the competitiveness and visibility of Mediterranean ports.

Given its strategic position, the port at Piraeus can capitalize on the geographical proximity of the Suez Canal to become a major distribution hub for Chinese goods to Europe, not least because more than 80 percent of trade between China and the European Union is maritime.

That being said, these newfound opportunities should not be taken for granted. Since 2011, multiple crises on the southern and eastern shores of the Mediterranean have created a ring of tension and insecurity from the Maghreb to Turkey and aggravated the extreme volatility of the geopolitical landscape. The political and social turbulence of the Arab Spring shattered the stability of the region, and reverberated well beyond the geographical boundaries of the Middle East-North Africa (MENA). Already, this instability has profoundlyimpacted China’s economic projects in the region. In Libya, Chinese oil investments suffered major setbacks after the ousting of Muammar Gaddafi, while attacks on some 27 Chinese construction projects resulted in a 45 percent fall in contracted projects. Beijing had to rush to evacuate more than 35,000 Chinese expatriates when unrest broke out in Libya in 2011.

As the Maritime Silk Road is to extend from the southern coast of China all the way to Arab crossings and ports on the shores of the Red Sea and the Mediterranean Sea, China will need a peaceful and stable geopolitical landscape along the straits of Hormuz, Tiran, and Bab-el-Mandeb if it wants to reach the European market. Infrastructure investments such as those made for the Piraeus, involving an entangled web of ports, highways and railways, will need a secure environment to prosper.

China’s lack of strategic vision in the Mediterranean region

Thus far, the Silk Road strategy has fallen short of any tangible policy actions which would indicate that Beijing is ready to adopt a more pronounced stance on the political and security issues that destabilize the Mediterranean region. The nation’s ambitions to “go global” and its new power, size, expanding interests, and influence strikingly contrast with its timid, hands-off approach to regional security challenges and the conduct of a low-cost policy. In practice, this has translated into China limiting itself to its responsibilities as a permanent member of the United Nations Security Council.

Xi Jinping’s recent Middle East tour and the publication of China’s first-ever Arab policy paper last January are welcome moves for diplomatic ties, but China will need more than the signing of strategic partnerships and the writing of billion-dollar checks to prevent the escalation of crises in the region and secure its investments. On the major issue of the on-going civil war in Syria, Beijing has not sought to stick its neck out, instead regularlyvetoing resolutions from the United Nations Security Council that would impose sanctions on Syrian President Bashar al-Assad. Similarly, Beijing remained stubbornly silent when the Israel-Palestine Peace Process collapsed in 2014, while its cautious attitude toward the civil war in Yemen illustrates the country’s rigid adherence to its policy of non-intervention.

This is despite the fact that many Arab states perceive China as a more balanced player in the region than other great powers – in particular the United States. Many hopes were placed in the appointment of a Chinese Middle East envoy in 2003, but the position’s mandate has been confined to an information gathering and consultative role. China’s reluctance to engage on security issues reflects a major fault line in the strategic assessment of how it could, in realistic terms, “safeguard peace, stability and development of the region and the world at large” (as described by the Arab Policy Paper), under its grand project of reviving the Silk Road.

Yet, access to the European market via Piraeus, along with the preservation of the vital flow of resources such as energy and other raw materials from the Middle East and Africa, crucially depend on the stability of the Mediterranean region. Maintaining a safe geostrategic environment and securing the geopolitical interface of the Middle East are sine qua non conditions for the realization of the Maritime Silk Road.

There is much at stake in the Mediterranean region for Chinese interests, and the Piraeus deal may well constitute a stepping-stone in China’s pursuit of the Belt and Road project. But China should take it as an incentive to complement its mercantilist policy with the formulation of a long-term strategic vision, one that bolsters regular political dialogues and intensified security, defense, and military exchanges with countries along the maritime route. One thing is for sure: there will be no Silk Road without addressing the gap between economic interests and the capacity to protect those interests. Securing investments in a region of extreme geopolitical volatility, where even Western companies decided to leave a couple of years ago, will be a tough test for China’s foreign policy. Most likely Beijing will have to forgo strict compliance with its principle of non-interference if it wants to reap any benefits from its Mediterranean Odyssey.

Elodie Sellier conducts research at the external relations department of the European Parliament in Brussels, Belgium. She writes in her own capacity; her views do not represent those of her employer.