Boxed In at the Docks: How a Lifeline From China Changed Greece

When Chinese shipping giant Cosco snapped up the historic port of Piraeus, it threw Greece an economic lifeline. Now the port’s success is reshaping the Greek political landscape—and generating choppy waters for China in Europe.
July 22, 2019, 8:30 AM UTC
A container pier at Piraeus. Since Cosco installed state-of-the-art cranes, the port’s annual cargo processing rate has increased more than fivefold.
Alfredo D’Amato—Panos Pictures for Fortune

On a steamy night earlier this summer, about a thousand people poured into a public square in Athens to cheer on Greece’s leading left-wing politician, Alexis Tsipras. Tsipras was in the waning weeks of his term as Prime Minister—and trailing in a race against a pro-business opponent. 

Leaping onto a makeshift stage in front of a banner reading “We have the power,” Tsipras shouted over the crowd. “This is a battle between two worlds, the elites against the many!” Then he took aim at foreign companies eyeing investment prospects in Greece, one of the countries hardest hit by Europe’s long financial crisis. “We have managed to get back to growth after eight straight years of recession,” Tsipras said. “Electricity, health, education, water, energy—they are not for sale!”

The promise to keep the country’s state-owned assets in Greek hands elicited a deafening roar. And yet Tsipras didn’t mention the most prized Greek asset of all: the port of Piraeus. Situated at the edge of Athens—a short sail from the Middle East and Africa—the port has been a strategic jewel for nearly 2,500 years, ever since the Athenians and Spartans defeated the Persian emperor in a nearby sea battle for Mediterranean supremacy. But as the crowd in the square knew, Tsipras’s own government had sold off Piraeus, years earlier, to a modern-day empire intent on expanding its own power: China.

When Chinese President Xi Jinping unveiled the ambitious vision he called the Belt and Road Initiative, or BRI, in 2013, he had commerce, not conquest, in mind. Xi announced that China would build a network of highways and rail lines (the “belt”) and sea routes (the “road”) across thousands of miles, linking Asia to Europe and Africa. The idea was to re-create the old Silk Road—the trade routes between East and West that were the foundations of the world’s first truly global commerce. The ultimate strategic goal: to expand and solidify a web of trading relationships that would cement China’s position as a dominant economic and political power for decades to come. 

Piraeus has become a showcase display of the BRI in action—a project capable of transforming not just one port but perhaps an entire economy. It’s also an object lesson in the ways China’s biggest companies both execute and benefit from the BRI. The port has been majority-owned since 2016 (and operated since 2009) by China Cosco Shipping—a state-owned giant established nearly 60 years ago by Communist founding father Mao Zedong. 

When Cosco stepped in, Piraeus “was a pretty backward container terminal that nobody took seriously,” says Olaf Merk, the ports and shipping expert at the International Transport Forum at the Organization for Economic Cooperation and Development (OECD). “China saw an opportunity that was underdeveloped.” New management has brought dizzying change: This year, the port will handle five times as much cargo volume as it did in 2010, according to the Piraeus Port Authority. And it’s on track to become the biggest container port in the Mediterranean, perhaps as soon as this year, overtaking Valencia in Spain. 

Cosco, meanwhile, has undergone its own rapid growth, thanks in large part to the BRI and to substantial Chinese government support. After several mergers with other transport companies, Cosco is now the third-biggest shipping company in the world by volume, with $43 billion in revenue—and significant stakes in other ports that ring Europe. 

In recent years, China has trumpeted Piraeus as a model for what the BRI can achieve. And its impact is visible throughout Athens: in more jobs at the port, in Chinese-language advertisements for local real estate, and in plans to remake Piraeus as a tourist destination for the burgeoning Chinese upper classes. 

But Piraeus’s revival also coincides with growing doubts in Europe about the strings attached to Chinese investment—as leaders question whether its sheer scale is a threat to Europe’s sovereignty, and perhaps even its security. Already, the political landscape in Greece has shifted in ways critics see as too friendly to China. Chinese naval vessels have docked at Piraeus—raising hackles at NATO, of which Greece is a member. This spring, as Xi toured the continent to stump for the BRI, European Union leaders issued a tough statement that for the first time called China a “systemic rival” whose political values—a centralized government with no tolerance for dissent, run by a leader with a lifelong grip on power—clash with Europe’s own.

The EU also called out Chinese state-owned enterprises like Cosco for having unfair advantages over the continent’s own private-sector companies. “The balance of challenges and opportunities presented by China has shifted,” the EU statement warned. Whether that balance should still tip toward cooperation is a debate now playing out on Piraeus’s docks.

When Westerners think about competition with China, the conversation often involves advanced technology—think artificial intelligence or 5G Internet. But the BRI underscores the importance of the infrastructure of trade itself: railways, roads, harbors. Ports may be the most vital link in that network. Roughly 90% of goods traded internationally makes its way around the world by sea. Control the shipping lanes and ports, and you wield great power over the global economy. “Xi thought, ‘What will my legacy be?’ ” says Nicolas Vernicos, a fourth-generation Greek shipowner and vice chairman of the Silk Road Chamber of International Commerce, a trade organization headquartered in China. “He decided to be the Marco Polo of the 21st century.”

If completed, the BRI will be one of history’s biggest infrastructure projects. Already Chinese companies are laying highways, operating ports, and creating railway networks in as many as 60 countries as varied as Sri Lanka, Malaysia, and Kazakhstan. Chinese government spending and subsidies keep the shovels moving. The Council on Foreign Relations estimates that China has spent about $200 billion on BRI projects so far; that investment could reach $1.2 trillion by 2027, according to Morgan Stanley. The result, Xi said in 2015, will bring “a real chorus comprising all countries along the route, not a solo for China.”

European voices make up only a small share of the chorus so far: The biggest BRI projects are underway in Asia and Africa. But outside of the BRI, Europe has seen Chinese investment rise quickly. With most EU economies still sluggish in the aftermath of the financial crisis, and heavy debt loads restraining government spending, Chinese companies have filled a void. 

Indeed, as trade tensions impair China’s ability to invest in the U.S., Europe now accounts for almost a quarter of China’s direct foreign investment—about $22 billion in the first half of 2018, according to law firm Baker McKenzie. State-owned ChemChina bought Swiss agribusiness giant Syngenta in 2017, for $43.1 billion. In 2016, China’s Midea spent $5.3 billion to buy German robotics manufacturer Kuka—which, among other things, keeps Volkswagen’s factories ticking. Technology player Huawei, which the Trump administration has branded as a national-security threat, maintains its largest logistics center outside China in Hungary, where it employs 2,000 people.

WHERE EMPIRES OVERLAP Athens is home to a community of some 10,000 Chinese expats.
Photograph by Alfredo D’Amato—Panos Pictures for Fortune
A Chinese crossing the street with a trolley carrying article of clothing.
Photograph by Alfredo D’Amato—Panos Pictures for Fortune
Cosco hopes to expand Piraeus as a tourism destination to compete with sites like the Acropolis for affluent Chinese visitors.
Photograph by Alfredo D’Amato—Panos Pictures for Fortune
A Chinese man buying fruits at the local market.
Photograph by Alfredo D’Amato—Panos Pictures for Fortune

“Money does not like a vacuum,” says Yanis Varoufakis, Greece’s left-wing former finance minister, who helped negotiate the country’s bailout with the International Monetary Fund and the EU in 2015. Varoufakis blames EU leaders for leaving companies vulnerable to takeovers. “European decision-makers [are] keeping investment at the slowest level in history and leaving the Chinese to come in as the only investors,” he says. 

Cosco has quietly become one of the busiest of those investors. Even before the BRI was unveiled, it began acquiring stakes in numerous key ports, piecing together a network of terminals around Europe. (The company signs long-term concessions with local governments; Piraeus is the only European port where it owns outright a controlling stake.) Its holdings include 47.5% of the huge Euromax terminal in the Dutch city of Rotterdam; 100% of the container port in Zeebrugge, Belgium; and stakes in terminals in Valencia and Bilbao, Spain. In Israel, on Europe’s edge, it’s building ports in Haifa and Ashdod. 

Cosco’s rise also shows how state-owned companies benefit when they subsume their strategy to the government’s grand plans. Growth and profitability are virtually assured—an advantage no U.S. or European company can match. “Operational losses of Cosco are compensated by state subsidies, and capital investments are made possible by generous credit lines,” explains Merk, the OECD analyst. 

China’s government has given an astonishing $1.3 billion worth of tax subsidies to Cosco since 2010, according to shipping-research organization Alphaliner. Alphaliner estimates that Cosco’s 2018 profit of $251 million from shipping activities was attributable almost entirely to subsidies, which Cosco reported at $230 million. State-owned banks offer other largesse, often in the form of low-interest loans. In 2016, China’s Export-Import Bank provided Cosco with $18 billion in financing to buy ships and acquire companies. In 2017, Cosco got $26 billion in financing from the China Development Bank for BRI projects—work that Cosco now leverages to expand globally. 

Cosco’s Chinese executive in Piraeus, Capt. Fu Cheng Qiu, declined multiple requests for interviews; Cosco officials elsewhere in Europe and China did not respond to interview requests. But publicly, the company’s officials aren’t shy about their plans for global growth. “Scale-up will still be the long-term trend for our industry,” Zhang Wei, executive director of Cosco’s port arm, said in April. 

When you drive into Piraeus, five miles from downtown Athens, past auto-body repair shops and small cafés, there is no sense that you’re entering a flash point of controversy. Though some 450,000 people live in the town and its surrounding neighborhoods, Piraeus has the feel of a suburb that has seen better days. At lunchtime, the plastic tables at the café on the pier fill with dockworkers, smoking cigarettes and discussing their lives over $5 plates of sardines—offering a window into the tumultuous decade they have endured.

Giorgos Alevizopoulos, a burly man of 64 with a mustache and beard, says he began working in the port at 17, in 1972—when shipbuilding was Greece’s powerhouse industry. He ultimately became a welder, working on vessels under repair or maintenance on dry and floating docks where dozens of small companies operate on piecemeal jobs.

But by early this century, work in Piraeus had slowed to a crawl, as companies sought cheaper repairs in other nations or patronized more modern shipyards. Years of labor strife also reduced the port’s appeal. Alevizopoulos says he worked only about 50 days a year between 2005 and 2014. “My entire life changed, and my outlook on life changed. I even contemplated suicide,” he says. “Some days we just ate bread. If there was a question about what we eat that day, the answer was always whatever is cheapest.”

For years, the Greek government seemed content to run Piraeus largely as a commuter port for the ferryboats that take millions of locals and tourists to islands in the Aegean Sea. The shipyards and cargo port, meanwhile, deteriorated year by year. Laden with debt and bogged down by political schisms and bureaucracy, the government neglected the upgrades that could have retrofitted Piraeus to serve the rapidly growing large-container shipping industry. By 2010, yearly cargo traffic had fallen to 880,000 TEUs, or twenty-foot equivalent units, the standard measurement for container throughput—a paltry fraction of the capacity of Europe’s biggest ports.

In 2008, China made its move. Cosco, then known as the China Ocean Shipping Group, signed a concession with the Greek government to operate Piraeus’s container terminal for 35 years, in a deal worth about 1.2 billion euros ($1.4 billion) in rent and facility upgrades and another 2.7 billion euros in revenue sharing. The powerful dockworker unions, anxious at the prospect of foreign ownership, went on strike for six weeks. They hung a banner on Piraeus’s waterfront on the day the Chinese company took over that read “Cosco go home!” But with the global recession at its nadir, and few other options, the strikers soon returned to work. 

Cosco quickly overhauled one of Piraeus’s piers and implemented a major upgrade of its loading cranes. That vastly expanded Piraeus’s capacity, turning the port almost overnight into an attractive destination for container vessels. Cosco also ran the port more efficiently. “Before, the employees were public servants,” says Vernicos, the shipowner. “They were working less than eight hours a day and fishing most of the time.” 

Most important, Cosco now directs more of its own huge container-vessel traffic to Piraeus. As the ancient Greeks understood, Piraeus’s location makes it potentially invaluable. It is the closest major container terminal on the European mainland for ships emerging from the Suez Canal—and a gateway to a huge swath of southeastern Europe. “Before Cosco arrived, Chinese products had to go to Hamburg or Britain, and then they would go perhaps to the Balkans,” says Wu Hailong, owner of the Greece China Times, a newspaper catering to the 10,000 or so Chinese residents of Athens. “Now it saves about 10 days on the route.” 

WELDING A BOND Cosco has achieved labor peace, for now, with Piraeus’s historically fractious dockworkers and shipbuilders.
Photograph by Alfredo D’Amato—Panos Pictures for Fortune

Even as Piraeus got healthier, Greece labored under heavy austerity conditions imposed by its creditors. Its lenders demanded that the government make deep cuts to public spending—prompting hundreds of thousands of already-suffering Greeks to flood the streets in protest. Alexis Tsipras and Syriza won elections in 2015, campaigning on promises never to sell certain public assets. In the end, however, Greece had to do just that as a condition of a bailout by the EU and the IMF. Consider this: It sold its rail lines to Italy’s state-owned railway company for a tiny 43 million euros, less than some pro athletes earn in a year. Its natural-gas holdings were sold off to a private group; China State Grid, another state-owned company, bought a stake in Greece’s national utility. “Greece had choices, and it did not choose bankruptcy,” says Panagiotis Liargovas, an economist who headed the Greek Parliament’s budget office at the time. 

In 2016, Greece agreed to sell 51% of Piraeus to Cosco, including 100% of its container terminal, for a bargain price of 368.5 million euros, plus 760 million euros in upgrades and revenue sharing. Piraeus became Chinese-owned, effectively in perpetuity. And in 2018, it processed 4.9 million TEUs, making it Europe’s sixth-largest cargo port. 

Alevizopoulos, the welder, says his life has drastically changed for the better since then. He says he made nearly 20,000 euros last year—about four times as much as his earnings before the government sold the port. Even so, Greece’s economic ordeal has left its mark. “Psychologically, we have not recovered,” he says. “Like the rest of the people, we are still afraid.”

In August 2018, Greece finally exited the eight-year austerity program imposed by its creditors. Although the economy returned to growth in 2017, Greece’s GDP had shrunk an astonishing 45% between 2008 and 2016—the largest depression ever to strike a country in peacetime. It will take years more for outside lenders to feel secure about financing projects in Greece, says Yannis Stournaras, governor of the Bank of Greece, “so we hope for equity investment.” Such an influx is needed not just to boost the economy but also to literally rejuvenate Greece, the governor explains. Thousands of educated young people fled during the crash, and those who stayed have been reluctant to start families. “Only by producing good jobs will young couples produce more children,” Stournaras says. 

Cosco says it is generating such jobs. While many Greeks worried that Chinese control would mean that imported workers would displace Athenians, only a handful of the port’s staff is Chinese, and those are managers, rarely seen amid the ships and stacks of containers. Cosco’s chairman, Xu Lirong, recently told Chinese media that the company has created 3,100 jobs for Greeks and added about $337 million a year to the Greek economy—a meaningful sum in a country with GDP of about $200 billion. The port’s revenues were about $151 million last year, up 19.2% from 2017, and Cosco says it is aiming to more than double the container volume Piraeus handles. 

Boosters see Chinese money also bolstering other sectors that suffered during the dark years. Vaggelis Kteniadis, president of V2, one of Greece’s biggest real estate development companies, says he has had only five Greek buyers for his properties in Athens’s upscale seaside suburbs during the past 10 years. Kteni­adis helped persuade Greece’s government to launch a “golden visa” program in 2013, offering foreigners resident status in exchange for investing 250,000 euros in Greek property. 

Kteniadis estimates that Chinese buyers since then have snapped up more than 4,000 houses and apartments in Athens, about 450 from him alone, bought as second homes or short-term rental properties. Today, V2’s advertisements, in Chinese, are plastered across the baggage-claim area in Athens’s airport, offering home ownership as a rapid path to EU residency—an invaluable advantage for businesspeople. “The Chinese have saved Greek real estate,” says Kteniadis, who now has offices in four Chinese cities.

Chinese money could reshape the real estate of Piraeus itself. Guiding a reporter around the port one afternoon, Nektarios Demenopoulos, spokesman for the Piraeus Port Authority, points out a large abandoned wheat silo, which Cosco wants to convert into one of five high-end hotels; the company also envisions building a luxury shopping mall. The idea is to invest some 600 million euros to transform the sleepy town into a tourist hub, catering to cruise ships (some Chinese-owned) for which Piraeus is a stop. There is little to do in town currently, and passengers, if they disembark at all, make a beeline for the Acropolis 6.5 miles away. “The Chinese already have respect for ancient Greek culture,” Demenopoulos says. “But we still have a very small number of Chinese tourists compared to the thousands of Chinese millionaires.” 

In 2017, not long after Cosco bought Piraeus, the European Union drew up a resolution to present to the United Nations condemning China’s crackdown on human-rights activists. The EU had presented such statements on multiple previous occasions. But this time, Greece blocked the resolution, and a Greek foreign ministry spokesman called it “unconstructive criticism of China.” That incident exposed a deepening divide among EU countries over how to deal with China—and stoked the fears of China hawks that countries would be willing to sacrifice principles for monetary gain. 

This year, the stakes rose dramatically. In March, when President Xi landed in Rome for a state visit, Italy’s presidential guards lined up on horseback to greet him, as they do for the Pope. Later, tenor Andrea Bocelli serenaded Xi at a formal dinner. Italian companies signed deals with China worth $2.8 billion, and Italy agreed, in principle, to join the BRI, becoming the first member of the G7 group of major Western economies to sign on. Here, as in Piraeus, China’s maritime ambitions play a role: Italy is courting Chinese investment in four of its ports, including Trieste, a city whose direct-rail connections to Belgium and Germany represent some of Europe’s most valuable trade routes.

It was Xi’s splashy Italy visit that jolted EU officials into issuing their warning about China as a “systemic rival.” The EU plans to more rigorously monitor investments by state-owned companies like Cosco. It has begun rolling out guidelines to prevent countries from ceding control of strategic infrastructure or sensitive technology—an attempt to mirror the U.S. Treasury’s Committee on Foreign Investment in the U.S., or CFIUS, which examines deals involving American companies. Closer examination of security threats and unfair competition “could severely affect China’s investment footprint in Europe,” concludes a recent report by the Rhodium Group and the Mercator Institute for China Studies in Berlin. Indeed, data on Chinese investment in Europe shows that its pace is already slowing.

Within Greece itself, divisions over foreign investment—including in Piraeus—run deep. Some critics have long griped that the government sold too low, even though Cosco was the highest bidder in an open process. Local officials have, for now, blocked Cosco’s hotel and mall plans, on the grounds that they would disturb archaeological sites.

Some business leaders want the state to prevent Cosco from replacing Greek know-how with Chinese infrastructure. Piraeus’s cranes, for example, are supplied by ZPMC, a subsidiary of yet another Chinese state-owned entity. “Even the screws come from China,” says Thodoris Dritsas, a former Greek shipping minister. “There are Greek companies that could do this.” The dockworkers suspect Cosco has designs to replace their union members with freelance labor acquired through recruitment agencies. 

At the national level, events are moving in Cosco’s favor. After campaigning against foreign takeovers, Tsipras’s Syriza Party was trounced in elections in early July. Voters wrung out from years of tax increases and belt-­tightening voted in the New Democracy Party. Its leader, new Prime Minister Kyriakos Mitsotakis, is a 51-year-old, Harvard-educated former venture capitalist who promises to lure big investors. In a conference about the BRI in Athens weeks before the election, the vice president of New Democracy, Adonis Georgiadis, said the party “welcomes Chinese companies to invest and grow in Greece.”

On a walk through Piraeus, worries about China’s influence seem dwarfed by the towers of containers on the dockside—bulky symbols of the port’s prosperity. Giorgos Gogos, general secretary of the local Dockworkers Union, says the era of strikes and protests is over—for now. That harmony could end if Cosco threatens union workers’ incomes. Still, after a decade of recession and pain, Piraeus’s dockworkers sense the chance for growth—or, at least, stability. “We are tired of struggling all the time,” Gogos says. “We need a period of peace.” For now, that desire for peace seems to outweigh national pride. 

Additional reporting by Pavlos Kapantais

A version of this article appears in the August 2019 issue of Fortune with the headline “Boxed in at the Docks.”

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