Facing financial woes and the simmering threat of "Grexit" from the EU, Athens is in need of new investment from Russia and China
The first half of 2015 was the most turbulent period in the history of modern Greece since the consolidation of democracy in 1974. After gaining power in January 2015, the leftist Syriza party, with its coalition partner, the Independent Greeks, attempted to renegotiate with the country’s creditors, almost triggering its exit from the eurozone. Although the new Greek government agreed to a four-month extension of the second bailout package, it failed to contribute the necessary resources to resolve the situation, and instead imposed capital controls and organised an ambiguous referendum, before finally crashing back down to reality in July.
The “Agreekment” of 12 July 2015 put an end to the possibility of a Grexit scenario, while providing a clear answer to those who were hoping for or speculating about alternative financial sources to refinance the Greek debt. This is where Russia and China come in. Deputy Prime Minister Yannis Dragasakis made clear in a pre-election interview in September 2015 that his government had unsuccessfully attempted to secure loan finance from third countries.1 Beijing and Moscow weren’t prepared to grant bilateral loans to Greece but were highly interested in expanding their investments in the country without challenging its Euro-Atlantic orientation. China sought to place future investments in the context of its “One Belt, One Road” policy, while Russia was keen on making new partnerships in a period of international isolation.
China’s interest in Greece
Sino-Greek relations initially caught the attention of the EU because of China’s desire to pursue an expanded investment policy and to play a role during the Greek economic crisis. As former Greek Prime Minister George Papandreou revealed, Beijing has bought €6 billion of Greek sovereign bonds.2 Additionally, in 2010, China pledged to double bilateral trade with Greece to $8 billion within five years and to increase its imports of Greek olive oil, wine, marble, and other products.3 Further to this, it has given favourable loans in return for the construction of Greek ships in Chinese shipyards. Since the outbreak of the crisis, however, Greek governments have respected the EU framework when cooperating with China and avoided initiatives that might help the national economy at the expense of relations with the EU. In 2013, for instance, Greece agreed that anti-dumping measures proposed by the European Commission should be applied to imports of Chinese solar panels sold in Europe, despite the negative reaction from many Chinese companies.4
Sino-Greek relations have slowly but steadily improved since 2009, and the announcement of the One Belt, One Road (OBOR, or New Silk Road) plan by President Xi Jinping in September 2013 paved the way for a deeper cooperation. In June 2014, the Chinese Premier, Li Keqiang, visited Athens and discussed the possibility for further collaboration in infrastructure projects with then Greek Prime Minister Antonis Samaras, including shipping, logistics, ports, airports and maritime affairs.5
From a Greek perspective, stronger cooperation with China could boost tourism as well as the real estate sector. The number of Chinese tourists visiting Greece was 12,203 in 2012 and more than doubled to 28,328 in 2013. In just the first nine months of 2014 the number of Chinese tourists was 37,196.6 As far as real estate is concerned, since 2013 foreign citizens have had
the opportunity to acquire a long-term entry visa in Greece, if they decide to buy a property worth €250,000 or more.
From the beginning of 2015 onwards, Sino-Greek relations entered a new period of misunderstanding. Before the election in January 2015, some ministers of the new cabinet and other members of the governing Syriza party started to question Greece’s the privatisation policy.7 The Chinese Ministry of Commerce responded by asking Greek authorities to protect the legal interest of companies including the China Ocean Shipping Company (COSCO), which has invested heavily in the Piraeus port project; and, for the first time during the ongoing economic crisis, the Chinese questioned the motivations of Greece’s new leader.8
It was only after the U-turn of the Greek government in July 2015 and its acceptance of the terms of the new bailout that Sino-Greek relations started to improve again.
The importance China attaches to Greece is high. COSCO is managing the construction of piers II and III in the port of Piraeus – a port which is a key component of China’s “One Belt, One Road” policy.9 It marks the passage from the Maritime Silk Road in Europe to the land-based one towards Europe. Specifically, Beijing wants to establish trade links from Greece to Central and Eastern Europe via the Balkans. This strategy was made clear during the 16+1 meeting in Belgrade in December 2014. Greece was officially absent from this meeting because it did not want to further frustrate its relationship with the EU.
The success of COSCO in Piraeus is widely acknowledged. In fact, the numbers speak for themselves – 3,030,000 twenty-foot shipping containers (TEUs) were delivered to piers in Piraeus controlled by the Chinese company in 2015, compared with 2,984,000 in 2014 and 2,520,000 in 2013. China has clearly communicated to Athens that COSCO is the “head of the dragon” in its policy to revive the ancient Silk Road. COSCO’s existing investments as well as its desire to invest more in Piraeus is one of the reasons China was highly concerned about the risk of Grexit in 2015.10 However, the Greek decision to cooperate with the Chinese in Piraeus has also created some concern in Europe. The European Commission has recently argued that Greece has granted COSCO benefits such as tax exemptions and preferential accounting treatment, providing the company with an undue advantage over competitors in breach of EU state-aid rules. Therefore, the EU has asked COSCO to pay the advantage it has received back to the Greek state, in order to deter China and Greece from further infractions of EU competition law.11 In parallel with the recommendation from the European Commission, Athens has also had to manage resistance from trade unions that claim that workers are losing their privileges.
The Chinese investment in Piraeus is also cause for concern in the EU because it will lead to China wholly controlling the Greek port. China is also in the bidding for the Thessaloniki Port Authority, which would allow it to expand its influence in Greece. The EU currently has no common policy for ports, which are able to autonomously make decisions on critical affairs such as their management by foreign companies without guidance or input from the European Commission.12 That said, the privatisation of the Piraeus Port Authority could speed up attempts within the EU to pass a new law that require member states to have at least two providers of port services to prevent monopolisation.
Last but not least, it is worth mentioning that China’s future presence in Greece can be facilitated to an extent by its positive public image in the country compared to other European states that want to invest, principally Germany. According to a poll in 2013, 83 percent of respondents in Greece want strong economic relations with China. In addition, 17.2 percent consider China as a friendly country, which constitutes the highest percentage vis-à-vis a foreign country following Russia (39.2 percent).13 In such a China-friendly environment, Beijing finds favourable conditions for the expansion of its “One Belt, One Road” initiative and possibly for the construction of the China–Europe Land-Sea Express Route. The recent creation of the association of Chinese companies operating in Greece, including COSCO, Huawei, ZTE, and Air China, is indicative of China’s interest to invest more.
The acquisition of the Piraeus Port Authority is not just a Sino-Greek affair. Its importance goes beyond the bilateral context and affects the evolution of Sino-European relations as a whole. In a period during which Beijing has stated that it will participate in Jean-Claude Juncker’s investment initiative and more Chinese investments in Europe are taking place, the Piraeus deal could be a model for both sides generating new Sino-European interest for partnerships. From a European perspective, it is also important that the president of the newly established China COSCO Shipping Group, Xu Lirong, publicly focuses on the importance of working conditions and environmental guidelines for his company during his official visit to Athens in April 2016.
The Russian angle
Russia can hardly claim to rival the expediency with which China has made direct and tangible inroads to Greece with its New Silk Road. In fact, Greek interest in Russia’s Eurasian Economic Union (EEU) has been rather tepid. Athens supports the launch and continuation of talks between the EU and the the EEU – principally on custom issues – and considers the recent Russian initiative “potentially another source of new wealth production and economic power”,14 but it has not taken any initiative on the matter and aligns itself with EU foreign policy. Greece and Russia have bilaterally cooperated on certain things, but not under the moniker of the EEU.
The meetings of Greek Prime Minister Alexis Tsipras with Russian President Vladimir Putin in Moscow and St. Petersburg in April and June 2015 respectively generated serious concerns in Brussels – and also in Washington – that there could be a potential Greek-Russian rapprochement. Although the possibility for a bilateral loan was officially excluded by politicians of the two countries,15 talk of potential Greco-Russian cooperation abounded during the period in which Greece seemed on the verge of leaving the eurozone.16 Further to this, one day ahead of Tsipras’s official visit to Moscow on 8 April, the President of the European Parliament, Martin Schulz, warned Greece to stick to the EU’s line on Russia sanctions.17 In theory, Greece would be prepared to play the card of the embargo in order to put pressure on the EU for a better economic deal in exchange for cooperating on the Ukraine crisis. This strategy could have entailed either a veto at the EU level or a practical unilateral blockage of the embargo by exporting Greek products to Russia and/or importing Russian ones.
The first meeting between Tsipras and Putin in Moscow ended without any clear results, but the will of the Greeks to participate in Turkish-Russian energy cooperation by complementing the proposed “Turkish Stream” with a new pipeline18 sparked a new wave of frustration in Europe and in the US, both of which were actively reducing their dependence on Russia for energy. Approximately two months later, during the St. Petersburg International Economic Forum, Russian media went further and reported that Russia would give a loan to Greece to join the “Turkish Stream” project on its soil.19 On this occasion, the two countries signed a deal worth of €2 billion.20 Responding to this Greek-Russian rapprochement, the Greek blogosphere was full of anonymous reports that Greece might even join the EEU at some point in the period from April until June 2015.21
Moreover, Russia’s invitation to Greece to join the BRICS-led New Development Bank deserves some attention. Responding to the invitation, the Greek government appointed its former representative to the IMF, Panagiotis Roumeliotis, to explore whether the country might be able to participate in the new scheme. Some scholars saw this possibility as unrealistic because founding members need to contribute €10 billion, Athens would not be able to find this amount of money, and other founding members would be unwilling to put up the cash for them.22 Some scholars were rather less reserved about the idea than expected. Andrey Shelepov, of the National Research University Higher School of Economics (HSE) in Moscow, explained that Greece could enter under favourable conditions by paying only €100,000.23 Jayshree Sengupta, of the Observer Research Foundation in New Delhi, went even further and argued that the BRICS-led New Development Bank could function as an alternative to the IMF if Greece joined.24
The re-engagement of the Greek government by the EU has put a lid on discussions about its alleged future membership of the New Development Bank. This is also the case with Greece’s bilateral relations with Russia as a whole. In an interview with the Italian daily Il Corriere della Sera, Putin said it “was up to the Greek people to make a sovereign decision in dialogue with their main European partners” about the future of their country, and argued that Russia was “building [its] relations with Greece irrespective of whether it is an EU, euro zone or NATO member”.25 However, this can hardly happen at the practical level. The experience is didactic. In 2013, the privatisation of Greek gas company DEPA failed and Gazprom decided not to submit a bid in a political and economic environment where both the EU and the US would have strongly resisted such a process.26
The ongoing political difficulties, along with the economic restrictions at the EU level, heavily influence Greek-Russian relations and the possibility of Greece doing business as part of the EEU. However, it is very early days for Russia and Greece’s relationship. In April 2015, for instance, the Hellenic-Russian Chamber of Commerce informed businesses that it is able to conduct studies into how economic cooperation between Greece and the EEU might work in areas such as agriculture, taxation, pharmaceuticals, medicine, marketing, transportation, tourism, real estate, etc.27 Irrespective of the obstacles in their way, representatives from the Greek business sector often exchange visits with those from Russia exploring the opportunity for cooperation in the future. As far as Russian investments in Greece are concerned, Russia – as is also the case with China – can benefit from its positive public image in Greece. A survey by the Pew Research Center in July 2014 demonstrates that 61 percent of people in Greece have a net positive view of Russia, making it the only European country to have an overall positive image of the country.28
At the time of writing, the possibility of Russia’s active participation in the Greek privatisation process is a significant issue on the political agenda. Russian railways have shown an interest not only, like China, in the Thessaloniki Port Authority, but also in the Greek railway company TrainOSE and rolling stock operating company ROSCO. To be more precise, Russia wants to buy the three Greek companies together rather than only one of them. The pursuit of this interest will go hand-in-hand with a likely holistic improvement in Greek-Russian relations. Beyond benefiting from the recent privatisation of some Greek businesses, some Russian businessmen have already expanded their presence in Greece. As a prime example, Ivan Savvidis, the owner of the Russian holding company Agrocom, is also a major shareholder of Thessaloniki’s PAOK football club.
Putin is expected to visit Greece towards the end of May 2016. Although this visit will principally be of a religious nature, due to the shared Orthodox faith, it will also give him an opportunity to engage in new investment discussions with Greek politicians. It is, perhaps, not a coincidence that Putin has scheduled his visit just a few days in advance of the deadline for submitting offers on the aforementioned Greek companies. As far as energy cooperation is concerned, although the construction of the Turkish Stream project has been cancelled due to the deterioration of relations between Moscow and Ankara, a new opportunity is presenting itself. In February 2016, Russia’s Gazprom, Italy’s Edison, and Greece’s DEPA signed an agreement for deliveries of Russian natural gas through third countries to Greece and from Greece to Italy via an undersea pipeline in the Black Sea.29
The re-election of Syriza means that the leftist party has to follow a pro-bailout policy, and is attempting to attract foreign investments without questioning Greece’s Euro-Atlantic foreign policy orientation. Good relations with China – in the context of its Silk Road – and with Russia – irrespective of its EEU – will be high on the agenda of the re-elected Greek government. Athens seeks to benefit from both countries by privatising sections of its infrastructure and does not believe it takes part in a competing game of different integration and investment projects. Even when it comes to the geopolitical implications of having close relations with countries such as China and Russia, Greece does not consider its position to be fundamentally different from that of other EU states.30 In the final account, Greece – as opposed to several European states – has not, until now, participated in the Asian Infrastructure Investment Bank (AIIB), while international media speculates on its hypothetical affiliation with the BRICS-led New Development Bank.
In the coming months, relations between Greece on the one hand and China and Russia on the other are expected to improve. The attention of the Greek government, however, will be primarily directed towards the privatisation of the Piraeus Port Authority. Greece will insist on privatising these industries only if there are potential future benefits to its national economy. Pillars of this Greek strategy include the launch of additional foreign direct investment – particularly from China and Russia – starting with the aforementioned sale of port authorities and extending to a significant increase in the number of tourists visiting Greece from these same countries.
The fragile state of its national economy makes it hard for Greece to turn its back on capital coming from China and Russia. The future course of privatisation will become important at the EU level because of Greece’s geographical position for non-European countries wishing to export goods to Europe. In that regard, the EU might need to closely monitor the situation in Greece in order to safeguard its interest there, as well as to better understand the policies of Beijing and Moscow. More importantly, however, the principal objective has to be the creation of conditions for win-win cooperation that facilitates trade and the growth of the Greek economy, but not at the expense of European values.
1 Interview with Yannis Dragasakis, euro2day, 9 September 2015, available at http://www.euro2day.gr/specials/interviews/article/1359826/dragasakhs-s-afth-th-fash-h-aftodynamia-einai.html.
2 “China bought Greek sovereign bonds worth of €6billion at the beginning of crisis”, China and Greece, 21 January 2015, available at http://chinaandgreece.com/china-bought-greek-sovereign-bonds-worth-6bn-euros-beginning-crisis/.
3 Speech by Ambassador Du Qiwen, Athens, 20 January 2012, available at http://www.jmc.uoa.gr/ekdhloseis/china-greece-and-the-eu/remarks-by-ambassador-du-qiwen.html.
6 Data are based on the Association of Greek Tourism Enterprises (SETE) and refer to Chinese tourists coming directly to Greece from China.
9 For a detailed discussion on the investment of China in the port of Piraeus, see Frans-Paul van der Putten, “Chinese Investment in the Port of Piraeus, Greece: The Relevance for the EU and the Netherlands”, Clingendael Report, 14 February 2014, available at http://www.clingendael.nl/sites/default/files/2014%20-%20Chinese%20investment%20in%20Piraeus%20-%20Clingendael%20Report.pdf. On the investment of China in foreign ports including Piraeus, see Frans-Paul van der Putten and Minke Meijnders, “China, Europe and the Maritime Silk Road”, Clingendael report, March 2015, available at http://www.clingendael.nl/sites/default/files/China%20Europe%20and%20the%20Maritime%20Silk%20Road.pdf.
11 “State aid: Commission orders Greece to recover incompatible aid from Piraeus Container Terminal”, European Commission press release, 23 March 2015 available at http://europa.eu/rapid/press-release_MEX-15-4650_en.htm.
12 “Piraeus port concession could reshape European supply chains’, the Journal of Commerce, available at http://www.joc.com/port-news/european-ports/port-piraeus/piraeus-port-concession-could-reshape-european-supply-chains_20150729.html.
14 Statement by Greek Prime Minister Alexis Tsipras at the Economic Forum in St. Petersburg, 19 June 2015, available at http://www.primeminister.gov.gr/english/2015/06/19/prime-minister-alexis-tsipras-statement-at-the-economic-forum-in-st-petersburg/.
15 Tsipras, for instance, responded negatively to a relevant question during a press conference after his meeting with Putin in Moscow on 8 April 2015. One day earlier, Russian Finance Minister Anton Siluanov said that Greece had not asked the Russian government for a loan.
16 George N. Tzogopoulos, “View from Athens: Walking the line between Europe and Russia”, European Council on Foreign Relations, 6 April 2015, available athttps://www.ecfr.eu/article/commentary_view_from_athens_walking_the_line_between_europe_and_russia31161.
17 Michelle Martin, “Schulz warns Greece to stick to EU's line on Russia sanctions – newspaper”, Reuters, 7 April 2015, available at http://uk.reuters.com/article/2015/04/07/uk-ukraine-crisis-russia-greece-idUKKBN0MY1ZX20150407.
18 Sarantis Michalopoulos, “Tsipras: ‘Turkish Stream’ will have another name on Greek territory”, EurActiv, 9 April 2015, available at http://www.euractiv.com/sections/global-europe/tsipras-turkish-stream-will-have-another-name-greek-territory-313636.
20 “Russia, Greece sign €2bn deal on Turkish Stream gas pipeline”, Russia Today, 19 June 2015, available at https://www.rt.com/business/268279-russia-greece-turkish-stream/.
21 Articles published on Defencenet.gr and Defencenews.gr constitute an example: “Exclusive: Tsipras will submit a request to Putin for Greece to enter the Eurasian Economic Union”, 1 April 2015 and “Eurasian Union: A choice for Greece?”, 17 April 2015.
22 Examples include Elena Lazarou, Head of the Centre for International Relations at the Foundation Getulio Vargas; Sergey Lukonin, Head of the Department of Economics and Politics of China at IMEMO RAN in Moscow; and Constantinos Filis, Research Director of the Institute of International Relations in Athens. See “The BRICS new Bank, Greece and the IMF”, China and Greece, 29 May 2015, available at http://chinaandgreece.com/brics-new-bank-greece-imf/ and “Can Greece join the BRICS Bank?”, China and Greece, 18 May 2015, available at http://chinaandgreece.com/can-greece-enter-brics-bank/.
23 “Greece can enter BRICS Development Bank under favourable conditions”, China and Greece, 4 June 2015, available at http://chinaandgreece.com/greece-can-enter-brics-development-bank-favourable-conditions/.
24 “The BRICS Bank will start functioning as an alternative to the IMF if Greece joins”, China and Greece, 18 June 2015, available at: http://chinaandgreece.com/brics-bank-will-start-functioning-alternative-imf-greece-joins/.
25 Vladimir Putin, interview with the Italian newspaper Il Corriere della Sera, 7 June 2015, available at http://www.corriere.it/english/15_giugno_07/vladimir-putin-interview-to-the-italian-newspaper-corriere-sera-44c5a66c-0d12-11e5-8612-1eda5b996824.shtml?refresh_ce-cp.
27 Press release from the Hellenic-Russian Chamber of Commerce on the implementation of case studies, 23 April 2014, available at: http://www.hrcc.gr/new/index.php/el/news/20060-2015-04-23-12-07-11.
28 “Russia’s Global Image Negative amid Crisis in Ukraine”, Pew Research Center, 9 July 2014, available at http://www.pewglobal.org/2014/07/09/russias-global-image-negative-amid-crisis-in-ukraine/.
29 “Gazprom, DEPA and Edison sign Memorandum of Understanding”, Gazprom press release, 24 February 2016, available at http://www.gazprom.com/press/news/2016/february/article267671/.
30 Thanos Dokos, “The geopolitical implications of Sino-Greek relations”, Clingendael, 10 June 2013, available at http://www.clingendael.nl/publication/geopolitical-implications-sino-greek-relations-0?lang=nl.
The European Council on Foreign Relations does not take collective positions. This commentary, like all publications of the European Council on Foreign Relations, represents only the views of its authors.