Struggle over the Silk Road

BERLIN/ROME/BEIJING (Own repot) - The West's power struggle against China is provoking new tensions between Germany and Italy. According to reports published last week, the Italian government plans to conclude a cooperation agreement with Beijing within the framework of the "New Silk Road" (Belt and Road Initiative, BRI) to benefit from Chinese investments in Italy's infrastructure, e.g. the Trieste port and Italy's power grid. China has already invested in several of the EU's periphery countries, heavily affected by Berlin's austerity dictate - such as Greece and Portugal - which gladly welcome these investments as relief. The German government is now beginning to make moves against this. Berlin seeks to prevent the People's Republic of China from increasing its influence within the EU and fears inner-European resistance if it takes aggressive action against its East Asian rival. Fierce debates are expected at the EU summit at the end of next week and at the EU-China summit on April 9.

The Rise of the Port of Piraeus

Greece was the first EU country to cooperate on a larger scale with China in its effort to expand transit routes between East Asia and Europe.[1] In November 2008 - five years before the Belt and Road Initiative (BRI) was officially launched in the second half of 2013 - Athens granted the China Ocean Shipping Company (COSCO) the concession to operate two container terminals in the port of Piraeus, which already has become one of the European terminals of the "Maritime Silk Road. " At the time, Greece would have preferred investors from the EU. The EU's centers of prosperity, however, particularly Germany, showed no interest in investing in that country confronting an escalation of the crisis. COSCO did invest, and the port of Piraeus became an economic success. Container handling climbed from 880.000 TEU [2] in 2010 to 3.74 million TEU in 2016. Between 2012 and 2016, Piraeus was the sixth fastest growing container handling port in the world. It had climbed to second place among the Mediterranean's highest-ranking container ports by the end of 2018. Trade circles expect that it will overtake the port of Valencia to become the Mediterranean’s highest-ranking container handler next year.[3]’

Modern Railways

In a next step, 16 east and southeast European countries,[4] including all of the EU countries of that region, have begun cooperating with China. Greece had begun its cooperation earlier. Since the first meeting of heads of state and governments in Warsaw, in April 2012, they have been meeting annually in a 16 + 1 summit, with one of the issues being the improvement of infrastructure. This opens the possibility for the railway expansion from Belgrade to Budapest with Chinese credits. The expansion of the rail link from Greece through Macedonia on to Belgrade is already in discussion. In the long term, this will make possible the transport of goods from Piraeus - a terminal of the "maritime Silk Road" - with a modern railroad directly to the heart of Europe. To be able to benefit from Chinese investments, the EU's "16 + 1" format countries cooperating with Beijing, have - like Greece - even officially joined the BRI.

"Positive Experiences"

This is also the case for Portugal, where enterprises from China - like in Greece - bought shares in what had previously been totally or partially state enterprises, when, during the financial crisis, Lisbon was under pressure from Berlin and Brussels to privatize state property.[5] China's Three Gorges Corporation currently holds a 23 percent stake of Energias de Portugal (EDP) while State Grid Corporation of China holds 25 percent of Redes Energéticas Nacionais (REN). It is said that Chinese investments in Portugal run in the range of €12 billion. Lisbon's government considers the current cooperation with the Chinese companies to be advantageous. "It is true that Chinese investments over the past few years have been substantial, and we welcome that," Pedro Siza Vieira, Portugal's Minister of the Economy was quoted saying.[6] "We have very positive experience with Chinese investments," said Prime Minister António Costa.[7] Costa has spoken out against particularly Germany and France's efforts to tightly regulate Chinese investments in European companies. In December, Portugal's Meo telecommunications company signed a contract with Huawei for the creation of its 5G network. Rather than "closing our borders to foreign innovations," the EU should invest more in training and research, admonishes Costa.

The Neglected Periphery

Chinese growth of influence in the European periphery are a thorn in Berlin's side. On the one hand, its East Asian rival is strengthening its standing within the EU - which the German establishment considers its exclusive hegemonic sphere. On the other, the Union's anti-Chinese positions have been blocked by individual countries' vetoes, for example Greece, for which cooperation with the People's Republic of China is of strategic significance. [8] However, it was Berlin's policies that had created the prerequisites for China's entrenchment: particularly through its crisis policy, which not only foresaw harsh austerity dictates, but also imposed the sale of state property, thereby creating the opportunity for Chinese companies to invest, and by neglecting the European periphery, when it did not serve the interests of German enterprises. Beijing now has the opportunity to plug those holes with Chinese investments that can cleverly be used to build up the infrastructure of those particular countries.

"EU Unity"

Italy, a country, which also has been made to suffer under the German austerity dictates and which sees its economic interests systematically ignored by the hegemonic power in Berlin, is now in a similar situation. As was made known last week, Rome and Beijing are working on a Memorandum of Understanding, which will include Chinese investments to expand the port of Trieste, making it a second "Maritime Silk Road" terminal at the Mediterranean - alongside Piraeus.[9] The State Grid Corporation of China will cooperate with the electricity company Terna. Other infrastructure projects are in discussion. The Memorandum of Understanding is due to be signed during the Chinese President Xi Jinping's state visit to Rome on March 22. The EU Commission is now raising objections - allegedly under pressure from Berlin and Paris - because every member country is supposed to "respect EU unity."[10] Although there is no unified EU position on the question, it is nevertheless clear that Berlin is opposed to closer Italian-Chinese cooperation.

New Restrictions

While Rome has not yet reached a final decision - the government is divided on this issue, with the Five Star coalition partner in favor and the Lega against closer cooperation with Beijing [11] - Berlin is trying to reach an EU investment agreement with China. The agreement will stipulate - and binding on all member nations - in which sectors Chinese companies may invest and which sectors will be off limits.[12] Last year, the German government blocked the State Grid Corporation of China's investment in Germany's 50Hertz grid operator, using a maneuver that critics consider "highly questionable."[13] Now it seeks to have its Beijing-blocking policy also applied in Southern Europe. Relations with China will be on the agenda of the EU Summit in Brussels, March 21 - 22; at the EU-China Summit April 9, the issue of an investment agreement will be discussed. If the agreement is signed next year, as planned, new restrictions, limiting the profitable economic cooperation with China, will be pending on the southern and southeastern EU member countries, already staggering under Germany's austerity dictates.


[1] In 2008, Germany had also first extended its feelers. The Deutsche Bahn AG began testing possibilities for large-scale use of the rail lines for transport from Germany through Russia to China. It took a few years before success was achieved.

[2] TEU is the abbreviation for Twenty-Foot Equivalent Unit: One TEU corresponds to a standard container 20 feet long.

[3] David Glass: Piraeus becomes second largest port in the Med. 07.01.2019.

[4] The nations participating in the 16 + 1 format are Poland, the Czech Republic, Slovakia and Hungary, Estonia, Latvia, and Lithuania, Slovenia and Croatia, Romania and Bulgaria as well as the non-EU countries Bosnia and Herzegovina, Serbia, Montenegro, Macedonia, and Albania.

[5] Philippe Le Corre: China's Golden Era in Portugal. 24.11.2018.

[6] Tiago Varzim: Siza Vieira diz que Portugal vai continuar a crescer acima da média europeia. 08.11.2018.

[7] Peter Wise, Ben Hall: Portugal PM warns on EU protectionism over China investment screening. 03.03.2019.

[8] See also Berlin Calls for a "One-Europe Policy".

[9] Samuel Stolton, Gerardo Fortuna: Leaked memo reveals China's detailed plans in Italy. 08.03.2019.

[10] Ruth Berschens, Regina Krieger: China spaltet Europa - und setzt dabei auf Italien. 06.03.2019.

[11] Andrea Carli: Italia-Cina, dal dossier Huawei alla nuova via della Seta: le divergenze Lega-M5S. 08.03.2019.

[12] Michael Peel, James Kynge, Lucy Hornby: EU seeks to hasten China investment deal to curb divisions. 07.03.2019.

[13] Daniel Wetzel: "Höchst bedenklich" - Altmaiers Husarenritt in der Kritik. 27.07.2018.