Cosco poised for Piraeus control as Greeks seek better bid from sole suitor

A fully-loaded container ship of COSCO departs from the Port of Qingdao in Qingdao city, East China's Shandong province in this file photo. [Photo/IC]

Chinese shipping giant Cosco moved a step closer to consolidating its hold over the key port of Piraeus this week after being named as the sole candidate to buy a majority stake in Greece's biggest harbor.

Greek government officials put on a brave face and said they would ask Cosco for an improved financial offer which would be considered within the week after two shipping rivals dropped out of race in the long-delayed sale.

"For the country's biggest port and one of the biggest in the Mediterranean and in Europe and with such prospects, it's not the best result in the final phase for there to be only one offer," Shipping Minister Theodoros Dritsas said today in an interview on state-run broadcaster ERT.

He said that, nevertheless, the government, led by Prime Minister Alexis Tsipras, would do its utmost to ensure Greece got the best possible price for a majority stake in a port that is key to China's plans to create a modern commercial empire pumping Chinese goods throughout the continent.

Hong Kong-listed, Chinese state-owned Cosco was the only confirmed bidder for the 67 percent stake in Piraeus Port Authority SA, where Cosco already runs container operations at two piers. APM Terminals, owned by Danish shipping conglomerate AP Moller-Maersk A/S and Philippines-based port operator International Container Terminal Services Inc. were also short-listed but didn't put in a binding bid.

The pending sale of a stake in the northern Greek port of Thessaloniki, the second-biggest, may have diverted APM Terminal's attention there, said George Tzogopoulos, a research fellow at Athens-based Hellenic Foundation for European and Foreign Policy.

Greece's bid to improve the offer is more of a face-saving measure for the leftist government and will allow Cosco to improve its offer "a bit", he said.

"Greece pushed its luck for more than 2 years until starting the privatization," Tzogopoulos said. "I don't think there is anything that might cause a serious disagreement given that Cosco's waited for such a long time."

Trading in shares in the port dropped today after being temporarily suspended yesterday. The company has a market value of around 360 million euros – on that basis a 67 percent stake is worth around 240 million euros. No figures for Cosco's bid were provided by the government.

Analysts see Chinese investment in Piraeus as a key part of China's One Belt, One Road policy, which envisages creating the 21st century land and maritime equivalent of the Silk Road. Since the Chinese shipping behemoth started container operations in 2009, traffic has surged at Piraeus, making the harbor one of the fastest-growing ports in the world. Premier Li Keqiang called Piraeus China's gateway to Europe in a visit to Greece in June last year.

The Piraeus sale is also seen as a yardstick in Greece's lacklustre state asset sales program, a key revenue-raiser tied to the country qualifying for billions in rescue funds from its European partners and the International Monetary Fund. An eventual win by Cosco could unleash more Chinese investment, such as in a major freight and logistics center on the outskirts of the Greek capital and a new airport planned for the island of Crete, Greek officials hope.

It would also be the first state asset sale the Tsipras government can claim since the leftist prime minister came to power a year ago, vowing to halt privatizations and tear up the two bailout agreements that forced higher taxes and cuts in wages and pensions on Greeks. He has tempered his tone since being forced in July to accept a new, 86 billion euro bailout to keep Greece in the eurozone.

Last month, the government wound up previously agreed deals for the privatization of 14 regional airports and the sale of seaside resort in Athens. Both those deals had been halted when Tsipras came to power last year.

Cosco has seen five separate Greek premiers, not including caretakers, since it won the license to operate Pier II in 2008 for 30 years at a cost of 490 million euros. The deal has become a regular campaign issue as Greek politicians seek votes from union workers, such as those in the Piraeus docks, unhappy about austerity measures.

Foreign investment in Greece has dried to a trickle amid six years of political turmoil and concerns of financial collapse. On the same day Cosco was named as the sole bidder for the Piraeus stake, Eldorado Gold, the Vancouver-based gold producer with operations in Turkey, China, Romania and Brazil said it would suspend much of its Greek operations in part due to an "openly confrontational attitude" from the energy ministry.

Concluding the Piraeus sale to Cosco will shape a framework for more Chinese investment in Greece, where six years of near financial collapse has meant record unemployment, Tzogopoulos said.

"China will now be prepared to invest more and these investments will contribute to Greece's growth," he said. "Ironically, this signal on privatizations being completed now is being sent by a leftist government that opposed them to come to power."

The author is a freelance writer for China Daily.