How COSCO Secured the Port of Piraeus: A Deep Dive into the Acquisition

Image source: https://www.piraeus.org/

Many claim that China is buying the world, and they frame the acquisition of strategic assets such as ports as part of its 'debt trap diplomacy,' a term coined in 2017. Since then, there have been multiple 'debunks' of the narrative. As I was studying the above throughout the year, I had one recurring thought: this does not sound right. Whilst my home country (Greece) is an important part of the Belt and Road Initiative (BRI), I had not heard of the debt trap diplomacy narrative being applied to the acquisition of the Port of Piraeus. Instead, in 2016, when COSCO acquired a 51% stake in the Port's Authority (although I was only 14), I thought this was helping Greece manage its debt, not create more of it. In 2021, when the Chinese State Owned Enterprise (SOE) purchased an extra 16% stake in the Port, I was more intrigued and ready to make my own judgements about the deal.

In building those judgements, I studied different BRI projects closely. From the Hambantota International Port in Sri Lanka, to the Niger-Benin Oil Pipeline, China has financed several important projects. Many BRI projects were built by Chinese (state-owned) companies. This is not the case for the Port of Piraeus, which was not originally built by Chinese actors. In fact, it underwent a lengthy 'financial journey' before coming under COSCO's ownership. Here is a timeline:

• February 13, 2002: “Piraeus Port Authority S.A” (PPA) signs a concession agreement with the Greek Government. This means that the PPA had the right to operate, develop and manage the port facilities for a certain period of time (40 years).

• September 1, 2003: PPA announces an Initial Public Offering (IPO), listing the company on the Athens Stock Exchange.

• November 19, 2008: COSCO and PPA sign a concession agreement to operate and develop Piers 2 and 3 of the port for 35 years (extendable for 5 years). This agreement followed a bidding process initiated by the Greek government.

• October 1, 2009: COSCO starts operating in the Port

• March 5, 2014: In light of the ongoing Greek economic crisis, the Hellenic Republic Asset Development Fund (HRADF) announces an "international tender process for the sale of a 67% stake of Piraeus Port Authority S.A." This was part of a wider effort to privatise state-owned assets. COSCO was the only company that placed a bid "at the final stage." However, in addition to COSCO, the following investment groups also expressed interest:

  • APM Terminals B.V. (Dutch port operating company)

  • Cartesian Capital Group LLC (New York-based private equity firm)

  • International Container Terminal Services, Inc (Manila-based port management company)

  • Ports America Group Holdings (US-based operator of marine terminals)

  • Utilico Emerging Markets Limited (UK closed ended investment trust)

• April 8, 2016: COSCO signs a share purchase agreement with the HRADF to purchase "51% of the PPPA for Euro 280.5m and the remaining 16% for Euro 88m, after five years,."

• October 25, 2021: COSCO officially acquires the entire 67% stake, despite fulfilling one third of their original 2016 contractual obligations.

  
  

I put together this timeline because it is necessary to understand the complicated trajectory of COSCO's acquisition of a majority stake in the Port of Piraeus. It is easy to get lost in the catchy titles we see in the news that homogenise the entire Belt and Road Initiative. The above timeline places the acquisition of the port in a significant context, from a Greek perspective, and highlights the unique economic and administrative conditions in which the agreement took place. It also sheds light on the fact that whilst a handful of companies expressed interest in investing in the Port in 2016, COSCO was the only one to bid at the final stage. Such context is extremely significant when shaping opinions about BRI projects.

I hope this is helpful, and as always feel free to reach out to discuss any of the above. This is the first article of a series regarding the Port of Piraeus, so keep an eye out for future posts.