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Research Report

Greece, Israel, and China's "Belt and Road" Initiative

George N. Tzogopoulos
Copyright Date: Oct. 1, 2017
Pages: 47

Table of Contents

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  1. (pp. 1-3)
  2. (pp. 4-4)
  3. (pp. 5-5)
    George N. Tzogopoulos
  4. (pp. 6-6)
    George N. Tzogopoulos

    For many decades, the Mediterranean has been a West-friendly region. The US and the EU have had the lion’s share in defining the course of the Basin and the relationships with the majority of its countries. In recent years, however, the US decision to turn its attention eastwards; the European debt crisis, which has almost paralyzed the EU’s foreign policy; and the “Arab Spring” have created opportunities for other powers to boost their roles. China has slowly attempted to develop a presence in the Mediterranean by investing in logistics and infrastructure works. Vast economic resources, systematic, long–term planning, and...

  5. (pp. 7-9)

    China’s impressive economic growth in the 21st century and the gradual creation of a multipolar world have influenced the country’s place in international politics. Former President of China Hu Jintao and Prime Minister Wen Jiabao used the phrase “Peaceful Rise” (hepingjueqi), later revised to “Peaceful Development” (hepingfazhan).¹

    The Chinese leadership sought to make it clear that the country would not pose a threat but would seek to be a constructive and compliant member of the international community.² Academic debates interpreting China’s role in the world have flourished in the West, centering on the core international relations theories of realism and...

  6. (pp. 10-11)

    Greece and China established diplomatic relations in 1972 and the relationship was upgraded to a strategic partnership in 2006. Politically the two countries agree on two significant aspects. Greece respects the principle of “One China” and China supports the resolution of the Cyprus Question under UN auspices. The countries also represent two of the world’s most ancient civilizations and this cultural similarity has facilitated bilateral dialogue. As an EU member, Greece could not approach China unilaterally. However, this reality also constitutes an opportunity for Beijing, which has seen Athens as a gateway to Europe and a friendly voice for its...

  7. (pp. 11-12)

    In January 2008, an international tender for Greece’s two main container terminals in Piraeus and Thessaloniki was organized33 and in June COSCO was named the provisional winner.34 Five months later the agreement was signed during a ceremony attended by Chinese President Hu Jintao.35 According to the concession agreement COSCO would operate piers II and III of the container terminal (pier I would stay under the management of the Piraeus Port Authority) for a period of 35 years.36 It would pay an initial sum of €50 million to the Greek state, plus a percentage of annual revenues as well as a...

  8. (pp. 12-14)

    The success of COSCO in the Piraeus port, along with the launch of the Belt and Road initiative, whetted Beijing’s appetite for port diplomacy in Greece. The opportunity emerged when Greece needed to privatize the Piraeus Port Authority under its EU bailout obligations. China had expressed interest from the beginning, viewing COSCO’s role in Piraeus as “the dragon’s head” in its Greek investments and regularly repeating this expression in contacts with Greek representatives.

    Prime Minister Antonis Samaras visited Beijing in May 2013 and his Chinese counterpart Le Keqiang visited Athens and Crete in June 2014 in an effort to boost...

  9. (pp. 14-15)

    China’s investment in the Piraeus port goes hand-in-hand with the Belt and Road initiative. It marks the passage from the Maritime Silk Road to the land-based one towards Europe. Transit time between Shanghai and Piraeus is approximately 22 days, 10 days less in comparison to the transit time between Shanghai and the North European ports of Rotterdam and Hamburg. By significantly shortening the delivery time between China and Europe, Piraeus can become a major penetration point for Chinese goods in Europe.55 To take full advantage of the Piraeus port, Beijing also invests in transport links across the Balkan Peninsula. Its...

  10. (pp. 15-17)

    COSCO patiently waited for years to participate in the privatization tender for the Piraeus Port Authority. But problems – especially under the SY.RIZ.A administration – have affected investment perspectives. In February 2016, one month after the Piraeus Port Authority deal was signed, Reuters reported that COSCO was expected to make an offer for Greece’s rail network.59 This did not occur. The Greek rail operator (Trainose) was sold to Italy’s Ferrovie dello Stato for €45 million.60

    There are two main explanations for COSCO’s decision. The first is that the delay with the Piraeus Port Authority privatization had caused serious frustration in...

  11. (pp. 17-19)

    While Greece’s relations with China are almost exclusively related to port diplomacy and energy projects and are slowly expanding after the Belt and Road, Israeli-Chinese ties have a deeper background. Jerusalem and Beijing established diplomatic relations in 1992, although they had also cooperated during the Cold War, especially on the occasion of China’s “open-door” policy.75 The relationship has gradually flourished at the economic level but has evolved in parallel with Middle East dynamics. Different security parameters for both sides have dominated the agenda of bilateral negotiations, increasing their complexity and difficulty.

    China is a traditional supporter of the Palestinian cause....

  12. (pp. 19-20)

    Israel started to help China to promote modernization in the late 1970s. However, the normalization of the relationship after 1992 paved the way for closer collaboration. Despite American pressure regarding security affairs, economic cooperation quickly developed. Institutional initiatives facilitated the process. In October 1992 the bilateral economic and trade joint committee was established and in 1997 the two countries set up four sub-committees covering agriculture, electronics, telecommunications and medical equipment.95 In March 2000, Minister of Industry and Trade Ran Cohen headed a delegation to Beijing, which laid the foundations for the Sino-Israeli Agreement for a Framework of Cooperation in the...

  13. (pp. 21-22)

    As a matter of principle, China is keen on investing in fields that serve its national interest either domestically or internationally and are connected to its innovation aspirations. Israel constitutes an ideal case. Chinese investments in Israel have covered sectors such as the chemicals market, food industry, construction, agriculture, water and renewable energy technologies. Several examples can be mentioned. In 2011, for instance, Makhteshim-Agan, a leading Israeli and global firm was merged with Chem China.110 The deal, worth approximately $2.4 billion, was the largest ever between Israeli and Chinese state-owned companies.111 Moreover, Bright Food concluded a deal to purchase a...

  14. (pp. 22-23)

    Being already economically engaged in Israel, President Xi’s 2013 speech gave impetus to China’s port diplomacy. Israel potentially constitutes a stop on the Chinese maritime Silk Road connecting the Indian Ocean and the Mediterranean Sea through the Gulf of Suez.124 Even before the launch of the strategic Chinese plan, Israeli Minister of Transport Yisrael Katz signed a Memorandum of Understanding in China in July 2012 for infrastructure works. Following this, Beijing decided to expand the activity of Chinese companies in Israel in ports and the railway sector.125 The Belt and Road initiative was the springboard.

    China has shown great interest...

  15. (pp. 23-25)

    Chinese investment in ports is an almost routine. For Israel the most important challenge is to guarantee smooth arrival of commodities to its harbors. Naturally, China has depended on the Suez Canal to reach its largest export market in Europe; trade volume in 2015 amounted at €521 billion.138 However, with its traditional emphasis on finding alternatives and concerns about instability in the Middle East, the Chinese administration explored how it could benefit from Israeli stability and reliability to secure trade. Its main objective has been to find a way to avoid the Suez corridor. Drawing on its expertise of constructing...

  16. (pp. 25-27)

    The Belt and Road initiative and subsequent Chinese investments and plans have brought Beijing to the center of international attention. The cases of Greece and Israel, however, demonstrate that China had already begun to seek larger business and international roles even before Xi’s 2013 speech. COSCO expressed an initial interest to invest in Piraeus in 2006 and finally entered the port in 2009, while multifaceted Sino-Israeli relations have evolved around different sectors for many years. The Belt and Road cannot be considered a turning point or a driving force for Beijing’s interest in the Mediterranean but as a platform accelerating...

  17. (pp. 27-29)

    China’s approach clearly distinguished Greece from Israel but there are similarities. COSCO’s success in Piraeus is a model for PMEC in Ashdod and SIPG in Haifa. First, this is related to profitability. In 2014, for instance, COSCO’s revenue from the terminals business rose by 13.6%. This increase was attributed to three ports: the Piraeus Container Terminal, Guangzhou South China Oceangate Container Terminal, and Xiamen Ocean Gate Container Terminal.155 This was also the case in 2016 when COSCO’s revenues increased by 8.7%, with Piraeus Container Terminal and Guangzhou South China Oceangate contributing to the success.156 On the whole, China insists on...

  18. (pp. 29-31)

    From a broader perspective, China’s developing relations with Greece and Israel are part of a multidimensional foreign policy in the Mediterranean Basin that also includes approaches to Algeria, Cyprus, Egypt, Italy, Lebanon, Morocco, and Turkey. At first glance, Beijing’s motivations are economic and geopolitical.166 But some voices are warning against China’s potential involvement in the Mediterranean, seeing security implications as well as militarization dangers. This argument is linked to Beijing’s White Paper on armed forces published in April 2013 that stipulates protection of overseas energy resources and Chinese nationals abroad are major security concerns to be shouldered by the country’s...

  19. (pp. 31-31)

    The Belt and Road initiative is a new plan that will help China better explore the Mediterranean, intensify its ties with relevant states, and possibly aid in conflict management across Eurasia while putting trade and energy priorities above other interests. The ongoing competition between Beijing and Washington in Asia will arguably have a spillover effect in the Mediterranean, and China’s increasing international position is shaping a “new type of major powers relationship.” But this does not signal a fundamental change in Mediterranean regional dynamics.

    While Beijing is investing in its “wait and see” approach, it is the right time for...

  20. (pp. 32-45)
  21. (pp. 46-46)