ByTheEast: What have been the major transformations in maritime transport over the past 20 years?
Paul Tourret: With regard to the maritime industry, its timeframe can be divided into two segment, before and after 2002 – after which starts the age of globalization. In our vocabulary, we do not use the word “internationalization” but “globalization” which comes from the Anglo-Saxon vocabulary. From my side standpoint, globalization underscores the coming together, the interconnection and convergence of production, processing and consumption of global economies, into a single dynamic economy. In a sense, we are all on the same boat – emerging countries as well as developed countries. Globalization underscores a multiplication of trading connection and therefore of maritime transport.
Until the 2000s, we were mainly focused on the transport of manufactured goods from East-West and on the rise of raw materials to the West and Japan. The picture has changed somewhat today. Every country counts, especially the giant economies of India and China. This is the big difference with the maritime economy of 20 years ago. We have moved to the scale of a global world.
BTE: China started the development of new Silk Roads since 2013, it launched the Made in China 2025 program … It is changing its image, thanks to massive investments. How to read the Chinese maritime strategy today?
Tourret: The specificity of China is its paradigm shift: the reading of what China was doing – in geoeconomics as in geopolitics – came from a Western standpoint; we tried to analyze China’s actions and intentions and put forward theories. The Western mind has tended to view Chinese policy in a cold war mindset, just like it did with the Soviet Union.
China has stepped out of this Cold war prism through which we view it, by creating its own space through its strategic Silk Road, officially known as the Belt and Road Initiative (BRI).
“We are witnessing both a Chinese expansion and a process of mobility. We Europeans who love to draw maps for everything, don’t really understand the Chinese.”
Through BRI, Beijing is manifesting its political strategy, step by step. From 2013, China has projected itself towards Kazakhstan. For the Chinese, the Silk Road is a traditional reading of transcontinentality, with Russia, and later with Europe. Through BRI, China envisages the upgradation and modernization of infrastructures of the countries of Central Asia through which the Silk Road had passed; since this includes the Indian Ocean, it therefore is an oceanization of the BRI. We are witnessing both a Chinese expansion and a process of mobility. In fact, we Europeans who love to draw maps for everything, don’t really understand the Chinese. Accumulating points on the map is nice, but you have to make sense of it. And the right sense.
In fact, this new Silk Roads envisages greater economic cooperation between countries, especially in the infrastructure. Ultimately, it comes back to what we Europeans and Americans did a few decades earlier. The Western mind however reads this economic cooperation in a geostrategic framework; because of this it sees a rise in Chinese influence in Central Asia, where its partnership policies with traditional allies such as Burma and Pakistan, have translated into aid for economic development, which is mainly self-interested as we can see in Kenya or Djibouti.
I am very critical of the Europeans as they are prisoners of a gang of geopoliticians of military institutes, who have a very anxious reading of “Chinese aggressiveness”. On a case-by-case basis, this is true. There is no denying that the Chinese are aggressive, especially if you look at its positions with its neighbours in the South China Sea. But European analysts need to be able to distinguish China’s strategy in a geopolitical port like Gwadar in Pakistan and that of the shipping company Cosco at the port of Piraeus, in Greece.
We must not mix what is part of diplomacy, geostrategy and geopolitics, and what is part of the international economy of the major Chinese maritime conglomerates.
BTE: China has indeed generated giant groups, such as Cosco; there is also the ongoing merger of the two major shipbuilding companies (military and civil) CSSC and CSIC… In Europe, we often link economic influence and geopolitical influence. Do you think these big groups are not following Beijing’s political agenda?
Tourret: Naturally, there is an economic agenda for major maritime groups, including Cosco, which now wants the top spot in the maritime container segment in order to cement its positions in the oil and gas industry. Perhaps, it is not required to necessarily view its actions through the prism of geopolitics: is there a relationship between Cosco’s strategy which is gaining momentum in its business and the port of Gwadar which is useless? I do not believe so.
The economic dynamics of some big Chinese companies need not have synergy with the diplomatic and geopolitical dynamic of Beijing. These should not be systematically linked. China has become an economic monster that can afford to have large shipping companies as well as big shipbuilding companies. Do you consider today that Bolloré Logistics is playing the game of a post-neocolonial strategy from France to West Africa? For Chinese companies, it’s a bit the same.
BTE: Many figures are put forward concerning the Chinese presence in Europe: China would already be heading of 10% of European ports. China invests a lot in Trieste, Marseille, Zeebruge… You were talking earlier about the port of Piraeus in Greece where Cosco has invested 2 billion dollars. What is its specificity? What is the result of these investments?
Tourret: In my opinion, our reading of the case related to the port of Piraeus could be much improved. What you have to understand is that, an international ship owner needs his own ports to build his exchange platforms, just as airlines need hubs with privileged positions; Air France has one in Paris and in Amsterdam; it could have one in Philadelphia as well. This same paradigm applies to the shipping industry as well. In Piraeus, Cosco built itself a pivot because the Chinese company had the opportunity to do so by recovering the privatization of the terminals. As in Singapore, or in Port Said for example where they had 20% of the terminals.
When they took over a giant port in Abu Dhabi no one complained that the Chinese are getting their hands on the whole Middle East even if their investments in the Middle East are colossal as well.
“The Chinese are following the strategy of a maritime operator who needs terminals around the world; they want preferential transport lines and port positions.”
Essentially, Chinese companies want platforms. It should be understood that a transshipment terminal is simply a place designed to put large iron boxes on a quay so that the next boat can collect and redistribute them. There is nothing political or strategic about it.
That said, Cosco is continuing to invest in Europe. For example, when the Chinese company bought its Spanish counterpart Noatum from its national owner, it promptly acquired it. As a result, Cosco finds itself as the de facto owner of the ports of Bilbao and Valencia. In Belgium as well, the Chinese took advantage of Maersk’s desire to resell a terminal to set foot in Zeebrugge … In Turkey, the Chinese took a terminal at the port of Ambarli, west of Istanbul … No one has never said that the Chinese were taking control of the Bosphorus Strait.
The Chinese are following the strategy of a maritime operator who needs terminals around the world; they want preferential transport lines and port positions, just like the Europeans do with CMA-CGM, MSC or Maersk, the Koreans from Hyundai or the Taiwanese from Evergreen.
BTE: You talk a lot about Cosco. Are there other Chinese operators in this sector?
Tourret: We have also China Merchants Group, based in Hong Kong, which I could define as a port investment fund with a portfolio of terminals. It is not a shipping company with terminals like Cosco. It is a maritime conglomerate whose port vocation is essentially to be a shareholder or co-shareholder of port companies. China Merchants has had a presence in China for a very long time going back to dates even before Communist China. In Hong Kong, a few years ago, China Merchants bought Modal Terminal, one of the main handlers and the second terminal operator in Hong Kong. Since then, the group has internationalized, it has taken shares in Djibouti, in some other ports in Africa. It has also bought part of the port fund of the French company CMA-CGM.
In fact, with CMA-CGM, it has many terminals and the list expanded to the end of 2019. In practice, it is Terminal Link – a CMA-CGM subsidiary – which is the physical operator. In the shareholders’ round table, the CMA CGM terminals in Marseille and in Fos-sur-Mer are also owned by China Merchant and by DPW (a firm from Dubai).
Finally, there is a third major player: the Shanghai International Port Group. Based on the largest Chinese port, this company is also developing an internationalization strategy, but the results are yet to come. Large Chinese port companies often depend on their province or city and Shanghai is very dynamic. Then there is also Qingdao International Port which is developing the same strategy, to be followed in the coming years.
BTE: Regarding the port of Piraeus, press reports explained that Greece – given its economic situation – was the weakest link in Europe and therefore a privileged gateway for China. This would have allowed, according to some, to force the hand to the Greeks for the vote of some texts into the European institutions …
Tourret: I am always afraid of these journalistic shortcuts or those coming from analysis institutions. Here is what happened: since 2011, Cosco owned the two terminals of Piraeus. During the time of the crisis, both companies were privatized, with 75% of public capital and 25% floating capital on the Athens Stock Exchange.
The Greek state wanted to recover cash and in 2016, it sold the port of Piraeus to Cosco, i.e it sold the commercial enterprise which includes all the activities of the port. This allowed Cosco to control this large European port in its entirety. Once again, when the Europeans hold port positions in the world, we don’t label that as neo-colonialism…
I am therefore skeptical of Chinese political entryism. On the other hand, from a commercial point of view, Chinese companies took the opportunity to supply boats to the Greek fleet. While on paper, the Chinese can influence the Greek state over certain European policies, but what have we seen as a policy of influence of the Greek state on the European Union in the last fifteen years? Nothing. The policies of certain countries like Hungary and Poland are more worrying for the European Union than what Greece could do. I am always wary of these shortcuts.
The Chinese are satisfied with the situation; they are well received in Athens. It is an essential part of their strategy to have complacent European states. Italy for example is in the same position where the Chinese were announced soon in the port of Trieste.
What bothers me more is Russia’s policy in Syria: what will it do with Iran for the future of the area? How it will exert its influence on the price of oil?
“The Chinese are not adventurers. I do not believe that they have the will to set up in Lebanon, under its current political climate.”
BTE: So let’s take a look to the East of the Mediterranean. In 2018 and 2019, some Lebanese-Chinese fairs in Beirut promoted the economic ties between the two countries. There were a lot of publicity effects, for example from the Beirut CCI, without putting forward any figures. In Lebanon, the Chinese seemed interested in the development of the port of Tripoli, in the North of the country. But isn’t Lebanon’s current instability likely to deter these investments?
The Chinese don’t like unstable environments; you have to understand this clearly. The Chinese like strong regimes, irrespective of whether it is democratic or dictatorial, with whom they can build projects which have long term value.
This is clearly not the case with Lebanon. It’s like in Algeria where several projects are dragging on or are completely stopped. The Chinese are not adventurers. I do not believe that they have the will to set up in Lebanon, under its current political climate.
It should be understood that the Chinese do not make donations in the countries where they set up. Often, those countries that want equipment fall into the debt trap. The case of the new Hambantota port in Sri Lanka is instructive. China is not a donor; it wants to be an economic partner and servicing debt has always been expensive. In recent months for example, a pharaonic port project has also been suspended in Tanzania…
BTE: In Syria, the Assad regime sold concessions to the Russians for Tartus and to the Iranians for Latakia. Could the Chinese enter the game?
Regarding Latakia and Tartus where the Russians are present (for the military port), the latter would be unable to develop or upgrade the freight ports as the Chinese could do. Theoretically, Chinese companies could therefore set up there. Cosco or China Merchants Port could very well say that having a position in Syria, in Latakia for example, to have a complementary port in the Middle East, would enter into its development. This would be quite possible, especially for China Merchants Port which would arrive with Chinese construction companies to completely rebuild the port installations. There will always be some Chinese companies to rebuild it, and the Syrian state to go into debt. But today, I think it is fantasy politics.
The port activity in general also allows joint ventures between companies coming from different countries. The terminal operator, share owner, financier and builder are four different elements. You can see it very well in Africa: you can have a port financed by the Chinese, built by other Chinese, in co-ownership with a European company. This is a potential scenario for Syrian ports, but hard to believe, for several reasons.
Having said that, the development of these two Syrian ports will necessarily be with foreign capital. This may be wanted or developed by the Russians and the Iranians, but only the Chinese will have the capacity to modernize the infrastructure as it should be done. The only thing is that today, I do not know any operator who would like to invest there, under the current conditions of lawlessness in the country. Before, CMA-CGM was the port handler of an authoritarian but pacified Syria. No western interest related to the maritime industry will go into a quagmire like this one. The only ones who do it are the oil tankers: we take enormous risks for the oil, not for containers.
Once again, the Chinese like square things, they like order and having people who really represent something. They hate nothing more than instability or regime change, be it either democratic or authoritarian. The Russians however have no problem with instability since they maintain it.
The Chinese want to work in well-functioning environments. Internationally, they want to buy raw materials, sell their products and develop infrastructure. Let’s take Iran as an example: the Chinese do not really have a political stance; they mainly say to the Americans “Let us trade”. In contrast, the Americans told Cosco “Stop trading in Iranian oil, otherwise we will boycott your ships.” Ultimately, the Americans created another trade barrier for China.
BTE: What about Russian policy on the eastern Mediterranean?
Russia lives on disorder, because disorder disturbs the West. I do not believe that Russia’s support for Syria can be explained only for a simple military naval base at Tartus. Of course, it is useful for Russians to have a base in Syria to gain access to the warm seas, without passing through the Turkish straits. But wouldn’t the most important thing for Russia be to sell 400 million tons of oil and 100 million tons of gas each year to Europeans? What is more important: selling grain to the Egyptians or having a base in Latakia? Neighbor and rival in the same time, the new Russia is a complicated trading partner. It would almost make the Westerners feeling nostalgic about the USSR.
“What is more important: selling grain to the Egyptians or having a base in Latakia?”
Admittedly, Russia today places itself in an anti-Occidentalism perspective similar to Turkey and China. The problem is that both countries also have disputes with Russia. The world today is more like the world of 1880 than that of 1950. That is to say a world where we are in competition with our neighbors, and allies with the neighbors of our neighbors, because these are also in rivalry. Russia and Turkey, for example, have now found a modus vivendi while hating each other.
For the Russians and Europeans, it’s a bit of the same thing: Russians are normally one of the biggest suppliers to the European Union, and we hate them cordially. And for reasons different from those of Americans. We must not have a reading of blocks which clash, with the free Western world against Russia. Russia is trying to live in the middle of this complicated world, like all the other players, like the old Persia, the Arab-Muslim world with all its complexities, the Turkish bloc, the fractured Indo-Pakistani world – which is also complicated -, the Chinese bloc with its Korean and Japanese environment. This is true geopolitics, not just two opposing sides. Each piece of the world has become a “Great Game” as in Kipling’s novel, divergent interests with each joining of the great world civilizations.
The worst part is that all of these players are now linked by the world of trade. Our world is indeed very similar – also economically – to the world of the end of the 19th century: liberal from an economic point of view but where everyone observes a martial position. Even authoritarian regimes today need economic prosperity to satisfy their middle and working classes. We are in a real paradox today: the current world is in full tension when it has never traded as much and been in the interlocking as today. We are all dependent on each other and it’s not a bad thing. As Montesquieu said, “The natural effect of trade is to bring peace”, but I would add the stick on the back just in case, to strike your neighbour.
What is the spectrum of ISEMAR activity?
- ISEMAR is an observer of international maritime industries. We try to get an understanding, macro and micro, of the whole maritime transport system; this includes freight transport, flows, ship owners, ports, port companies, as well as shipbuilders. We also study offshore and renewable energies at sea.
- We are observers and not a think tank. We are independent and are only supported by local authorities from the Nantes-Saint-Nazaire region (located on the Atlantic Ocean), the port community and the Chamber of Commerce and Industry. We have a local base. We are the only ones in France who work and have expertise in this field.
- We publish briefing notes using references and cover many areas. Our latest case in point is our note on the geopolitics in the Indian ocean. Through press reports and magazines, we look at the role played by China in Africa as well as its strategic Silk Road. At this point, let me make myself very clear, as observers, our job does not cover geopolitics or geo-economics; we are observers of maritime transport.
- Our primary customers are port authorities, certain government departments, as well as companies in the maritime and in the port sphere. We offer a deeper understanding of systems, and give meaning to maritime news.