EU Outrage Clouds Hamburg Port Deal
Despite controversy surrounding the deal, the approval of a Chinese stake in Europe’s third largest port may be a smarter decision than it initially appears.
Prior to Chancellor Olaf Scholz’s visit to Beijing at the beginning of November, the German federal government allowed COSCO Shipping Ports Limited, one of the world’s leading port and terminal operators owned by the Chinese state, to purchase a 24.9 percent stake in a container terminal at Hamburg, Germany’s largest port. The Container Terminal Tollerot (CTT) is the smallest of the three HHLA owned container terminals in Hamburg. HHLA is a German logistics and transportation company that owns three out of the four total container terminals at Hamburg port. The port’s geographical advantage and extensive distribution facilities will help to secure COSCO’s position in one of the most important European-Chinese trading hubs.
The approved investment has generated criticism both within Germany and among other EU member states due to security concerns over China’s increased global influence, especially since the launch of the Belt and Road Initiative (BRI). The Hamburg deal was pushed through by German Chancellor Olaf Scholz and his Social Democrats Party but opposed by his coalition partners (the Free Democrats and the Greens) and the ministries they lead, notably the foreign ministry and economy ministry. Scholz’s visit to Beijing immediately following the deal further fueled domestic and international concerns over potential German overdependence on China. Understandably, European officials have heightened sensitivity to perceived overdependence on states that challenge traditional Western hegemony as Europe continues to struggle with the fallout of dependence on Russian gas in light of the Russian invasion of Ukraine earlier this year. However, a closer examination of the Hamburg port deal structure suggests that European leaders may have overreacted to COSCO’s minority ownership given the size of the stake and the FDI screening measures in place.
The sea route portion of the BRI, also known as the Maritime Silk Road, includes over one hundred investments made by the Chinese government and private Chinese companies in port projects worldwide, with at least nine of these port investments located in EU countries. Hamburg’s status as the largest port in Germany and the third largest in the EU (in terms of the volume of containers handled) has critics worried that this deal could allow China to gain dominance over a critical piece of German and EU infrastructure. But upon closer examination of the deal, it becomes apparent that this is unlikely to actually happen. The original proposal for a 35 percent stake in the CTT (which still would have been a minority stake!) was reduced in negotiations to 24.9 percent. This is just under the 25 percent threshold that would grant COSCO blocking rights, reducing the investment to a purely financial holding. It is important to note that no part of the Port of Hamburg itself has been sold to China or Chinese-owned companies, but rather a minority stake in a single container terminal owned by an independent German company that still lists the City of Hamburg as its most important shareholder . . . .
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