Trieste aims to be China’s main port in Europe

The Chinese are keen to invest in new terminals, docks, yards, logistics platforms and industrial areas in the northern Italian port, given its deeper integration into EU rail networks than Piraeus, the Greek port taken over by Cosco in 2016

A seaport city of just over 200,000 residents in northeast Italy could play a significant geopolitical role in promoting Eurasian integration. The port of Trieste is only the 11th busiest in Europe by tonnage, but nonetheless is designed to become the western end of the Maritime Silk Road, a key section of Chinese President Xi Jinping’s Belt and Road Initiative to improve connectivity between China and Western Europe.

Zeno D’Agostino, president of the Port Network Authority of the Eastern Adriatic Sea, the public company that runs Trieste port and other facilities in the area, told Asia Times that the Chinese were ready to invest in the infrastructure. “They have been attracted by Trieste’s geographic position, strong connectivity with the rest of Europe and robust supply chain,” he said.

According to recent statistics, the growth of seaborne trade between Europe and Asia slowed in the second quarter of this year. However, Trieste is bucking the trend. The Italian port is expected to move 730,000 TEU (20-foot equivalent units, a standard measure for container cargo) by the end of the year, its record for container traffic – they were 486,000 TEU in 2016. It has also doubled the number of operated trains from 5,000 to 10,000 over the past four years.

The port chief D’Agostino, who has just returned from a commercial trip to Chengdu, in China’s Sichuan province, stressed that by investing in Trieste port, Chinese companies would actually invest in an integrated system. “They are not only interested in funding the realization of new terminals, docks and yards, or innovative logistics platforms,” he said. “They want to contribute to the expansion and modernization of the port’s free zone, industrial areas and internal rail system.”

D’Agostino emphasized that he was essentially negotiating with state-owned Chinese enterprises involved in the New Silk Roads project. “Trieste port needs US$1.2 billion of financial investments to support its development, particularly the new industrial free zone,” he said. “Chinese investors are in talks to cover half the cost, though other foreign contractors have showed interest, including from Kazakhstan, Azerbaijan, Turkey, Iran and Malaysia.”

‘Italy is not Greece’

Italian Deputy Prime Minister Luigi Di Maio, political leader of the Five Star Movement, the anti-establishment leg of the Italian government, which also includes the Eurosceptic and anti-immigrant League party, said during a visit to China last week that Italy supported Chinese plans to develop the port of Trieste.

Italy could join Belt and Road by the end of the year, becoming the first G7 country to sign a Memo of Understanding (MOU) on the Chinese mega-project. Furthermore, as the European Central Bank has been moving to phase out its bond-buying program to stimulate the eurozone economy, the debt-ridden Mediterranean nation is also trying to persuade Chinese investors to buy its sovereign bonds.

But given problems that occurred in Greece and other countries that partnered China, many fear the Italians could grow dependent on Chinese investment and loans and be pressured, subsequently, into aligning their policies with those of Beijing – which often collide with EU rules.

Italian Cabinet Secretary Giancarlo Giorgetti said recently that Chinese investments in Italy were welcome, but also made clear that his country would not sell out national assets. D’Agostino is on the same page. He pointed out that Chinese companies would not buy or control the port of Trieste, as happened with the terminal in Piraeus, the main port in Greece and, partially, with Hambantota port in Sri Lanka and Djibouti. “They will only acquire minority stakes in existing businesses,” he said.

“Greece was on the brink of defaulting on its debt. It was forced to sell out its infrastructure,” D’Agostino insisted. “The Chinese literally bought everything at Piraeus, even the port authority.” He admitted that the Italian economy was not in good shape either, but said at least “there are still state institutions that manage and oversee Italian ports’ operations.”

So current alarmism on this issue was “misplaced,” he said.

Security matters

Security-related problems also factor into the equation when it comes to China’s investments in European ports. The EU is working on a screening mechanism for foreign investments in security-sensitive industrial sectors. It is basically aimed at protecting Europe’s high-tech industries and infrastructure from China’s unfair business practices.

Some believe the Chinese port operators could closely monitor the movement of US and Northern Atlantic Treaty Organization’s warships in Europe, gather information about their maintenance operations, and even try to access to sensitive US and NATO systems and equipment.

D’Agostino bluntly dismissed such concerns. He noted that there was a clear separation between the military and civil sides of Trieste port, and it was the same for other European terminals. “The Chinese do not need personnel on the ground to monitor warships docking at the port. They likely have more technologically advanced ways to spy on Italian and NATO vessels,” he said.

Piraeus ‘not as competitive’

The Italians are confident that Trieste will supplant Piraeus as China’s maritime gateway to southern Europe, despite Beijing arguing that the Greek port has increased container traffic after its acquisition by China Ocean Shipping Company (COSCO) in 2016. There is a considerable share of trade exchanges between Asia and Europe at stake. According to the European Commission, 70% of today’s trade between the two regions, measured by value, goes by sea.

Last year, Piraeus handled 3.75 million TEUs and that figure is expected to top 4 million this year. But the Italians believe they can get a big chunk of China’s sea cargo trade because their geographic location and links with Europe are so strong.

“After its expansion, Trieste port will initially be complementary to Piraeus. Then, there will likely be more competition between them” the port president D’Agostino said. However, he noted that its unique geography and integrated system made Trieste far more competitive than Piraeus as an entry point for goods shipped from East Asia.

Indeed, the Greek port is at the periphery of Europe, while Trieste is nearer to its heart.

“I have often told my Chinese interlocutors that they have made a mistake in focusing on Piraeus and the Balkan route, including the Belgrade-Budapest high-speed railway,” he said. “Chinese container ships save money by sailing further north to Trieste, where they are also served by a rail connection to Central and Eastern Europe.”

 

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