Greece as a rampart of West and the role of the two seagates Thessaloniki and Alexandroupoli
While the West was preoccupied with Russia as its chief rival in the turbulent Balkans, China has been slowly but steadily forking out for investments across the region and laying the groundwork for a coming geopolitical battle on the EU’s doorstep.
Anastassios Tsiplacos - Managing Editor
As Moscow is developing its own political footprint through pan-Slavic, cultural, energy and media campaigns, Beijing is focused on infrastructure development, where Western states are reluctant to invest. However, unlike Russia, whose main objective in the Western Balkans is to stymie NATO and EU expansion, China’s approach seems to be “business first, politics later.” (see: Bulgaria amid the US-Russian “Energy Clash”)
This is enticing to the short-sighted Balkan political elites who see the prospect of joining the EU or NATO as a long way off, hence greater engagement with China is a tempting auxiliary option and a way to soften Brussels’s conditionality. Low-interest loans and generous repayment schemes may be alluring for now, but they could well end up being “honey-traps” in the long run.
The “Belt and Road Initiative” strategy
In 2013, China unveiled its “Belt and Road Initiative”, a grand plan which aims to secure land and maritime trade routes from Asia to Europe and Africa. The Western Balkans, strategically positioned on Europe’s southern flank, is seen as a key access point for China to reach central Europe and beyond. In practical terms, it is far easier and cheaper for a Chinese cargo ship to dock in the Greek port of Piraeus and then transport its goods by road and rail towards central, eastern and western European countries, instead of going to the northern -and far pricier- ports of Rotterdam or Hamburg. In Beijing’s strategic calculus, the Balkans are merely a transit corridor towards more lucrative Western European markets, where real Chinese interests lie and where household consumption per capita is among the world’s highest.
To soften the political terrain, Beijing began holding annual “17+1” summits with eastern and southern European states to discuss investment opportunities. At these summits, Beijing began luring money-short Western Balkan countries such as Bosnia, Montenegro, Serbia, North Macedonia and even Greece, with its soft loans and generous payback schemes. It was an offer few could refuse.
Beijing then moved to “hard currency”. A starting point was the Greek port of Piraeus on the region’s southernmost tip and Europe’s fastest growing port, calling it the “dragon’s head” of the Belt and Road Initiative. It is now effectively in Chinese hands, as the China Ocean Shipping Company (COSCO) invested over €600 million in harbour facilities and acquired a controlling share in the port authority. North of Greece, China invested heavily in Serbia and Montenegro. Trade volume between Serbia and China continues to expand, topping €2.1 billion in 2018. With Chinese investments worth $10 billion, Serbia tops the list of Central and Eastern European states involved in the “17+1” framework, designed for cooperation between China and Central and Eastern European countries.
Serbia: China’s gate to Central Europe…
Railways are an ideal type of transportation when you need to move large quantities of goods and appears to be the most feasible option. It is also of particular interest to the Chinese who are already exploring new methods to shorten transportation time from the Mediterranean to Central Europe.
China’s flagship investment project in the region, though much delayed, is a railway line connecting Belgrade with Budapest. With mostly Chinese loans, Hungary and Serbia have agreed to modernise their respective sections of the 350-km Budapest–Belgrade line at a total cost of some €4 billion, split between the two countries.
On the other hand, the reconstruction of the railway line from Belgrade to the border of North Macedonia, with the support of the EU, will assist in Serbia’s transformation into the Balkan’s significant transportation and even energy hub. Coupled with the anticipated Chinese-funded canal network from Thessaloniki to the Danube River, close to Belgrade, Serbia is positioning itself as an indispensable part of the Belt and Road Initiative’s penetration into the Balkans and Central Europe, radically changing the geopolitics of the region.
With the expectation that the railway link will eventually extend beyond North Macedonia to reach Greece’s northern port city of Thessaloniki -considered the maritime gateway to the Balkans- the revitalization of the railway line would see Serbia become a true transportation hub, as it is the closest, fastest and natural route to the heart of Europe, because the route from Thessaloniki to the heart of Europe will be shortened by 300 kilometres compared to the already existing railway lines. Although there is no specific information yet, it can be expected that the construction will not just be a revitalization of the existing disused railway line, but a new high-speed link akin to what is already being constructed on the Belgrade-Budapest stretch.
After talks with EU officials, Serbia’s President Alexandar Vucic expressed his expectation that an agreement will be signed with officials from Brussels soon, according to which the EU grant will amount to €600-700 million, i.e. between 35%-50% of the value of the railway investment. According to Vucic, Serbia will be transformed into a different country with the high-speed railway link, dubbed Corridor 10, because it will create new opportunities thanks to better transportation connections for those who travel to/from Munich, Vienna, Sofia, Istanbul, Skopje and Thessaloniki.
Beijing’s river canal to the heart of Europe
China is also considering an ambitious, albeit feasible, $17+ billion project that would connect the Danube River, Europe’s second longest river after the Volga, with Greece’s Aegean coastline, via a new canal that would also utilize the Morava and Vardar/Axios river systems. Not only is Belgrade located on the Danube, but also the capitals of Austria (Vienna), Hungary (Budapest) and Slovakia (Bratislava), along with other major regional centers.
Although Chinese cargo ships already reach the Danube via the Black Sea entrance in Romania or Rotterdam in the North Sea, a canal linking northern Greece to the Danube close to Belgrade, will reduce shipping time to Central Europe by about three and a half days, thus saving China billions of dollars in shipping.
The canal project, along with the new railway link, following the same vertical axis from northern Greece to Belgrade, would radically change transportation options in the wider region. Although Greece, North Macedonia and Serbia will greatly benefit from these two transportation projects, the biggest losers will be Turkey -although Turkey constitutes a major part of the Belt and Road Initiative’s land route- and Romania, which in the coming years will no longer have millions of tons of cargo destined for Central Europe, passing through the Dardanelle and Bosporus Straits and the Danube Delta.
China’s drive to have as many transportation networks and options as possible, ultimately benefits the Western Balkans, a region that has been mostly forgotten about in terms of development. In this way, even if a railway connection between Thessaloniki and the Danube is constructed with EU funds, China benefits as it can access a new route to reduce transportation time to European markets by days.
The Chinese penetration of the Western Balkans should come as no surprise…
Though Chinese investments are perceived by local elites as an opportunity for faster development, they have not (yet?) translated into an institutionalised preference for Beijing as a political model. Western Balkan states who have not yet done so, still aspire to join the EU and NATO. However, without a credible and visible path toward Euro-Atlantic integration that too could change and the region could easily succumb to the lure of generous Chinese offers. Serbia is an example of a country inching ever closer to Beijing, so close that Serbian President Aleksandar Vucic refers to China’s President Xi Jinping as a “friend and brother.” In March 2020, while the coronavirus pandemic was blazing and European states were squabbling among themselves over Germany’s decision to ban the export of face masks, China flew tonnes of medical aid to Serbia. President Vucic publicly stated that China was “the only country that can help us.”
In Montenegro, a NATO member state, the China Road and Bridge Corporation (CRBC) is building the first section of the Montenegrin leg of the Bar–Boljare highway, covered by a €796 million loan from China’s Exim Bank. China has also become the largest investor in Montenegro with €70 million in direct investments in the first half of this year, according to the Central Bank of Montenegro. In Croatia, the CRBC is building the EU-funded Peljesac Bridge -the European Commission provided €357 million for it or roughly 85% of the project’s estimated cost.
The Chinese penetration of the Western Balkans should come as no surprise. A poor investment climate, the lackluster performance of the economy and failed privatisation efforts of communist-era state-owned enterprises, resulted in the entire region attracting little foreign direct investment. China saw this as an opportunity and simply filled a void made by the gradual retreat of Washington and the EU’s inaction.
Beijing is achieving much more than just paving the rough Balkan terrain for its Belt and Road corridor. By deliberately targeting the construction of critical infrastructure, China is in fact creating new economic dependencies abroad. So, if a borrowing Balkan country defaults on its debts, there is serious risk that a Chinese state-owned company will seize ownership of the infrastructure it constructed and operate it for decades until the debt is paid off. The tiny state of Montenegro is at risk, as it owes 40% of its total foreign debt to China.
Deterring Russian and Chinese expansion in the Western Balkans
The United States in the effort to deter the Russian and Chinese expansion in the Balkans, is committed to supporting the countries of the region, particularly the Western Balkans, on their path to European integration and membership in key European and Euro-Atlantic institutions. In order to counter Russia’s energy coercion, and protect strategic infrastructure and industries against China’s economic penetration, US is committed to guide and support these countries to deepen their own regional economic partnerships, achieving their goals through diversification and clean energy development, as well as combat corruption and organized crime. The best way to push back against this was to offer a positive message in terms of U.S. investment and U.S. engagement.
The United States also support the EU-facilitated Dialogue and encourage the parties to re-engage in this process with a sense of urgency, to address both technical and political issues. In addition to the development of strong economic ties to the region, it values its partnerships in the defense and security sectors, including with the newest NATO Allies, Montenegro and North Macedonia.
Washington also works with Serbia and Kosovo to implement their Washington Commitments in support of the goal of full normalization, and cooperates with the international community to support Bosnia and Herzegovina in pursuing the reforms that will enable it to secure EU candidate status.
President Biden and his administration have been clear that one of the big global challenges they confront is how to encourage China to play by the rules of the game, to support the rules-based international order that has built prosperity and peace for all of the region’s countries. And Greece is a very important partner together with all the other European partners as well.
Greece’s pivotal role
Greece is a full and equal member of the European Union and at the same time, is a reliable ally in a sensitive area for America and this is something given due attention in US power centers. This is the case at the purely bilateral level, chiefly centered on defense cooperation, and is augmented by the right partnerships and alliances Greece has built with other countries in the area, which have their own strategic ties to the US. The puzzle is completed by the bond traditionally shared between the two countries and the role of the Greek diaspora, whose presence in Congress – which many wish was greater but is nonetheless important – and influence in the US economic and business life bring Greece the corresponding benefits.
Greece has its own distinct economic and political presence and it has its military force, but it also has institutional partnerships and alliances that form a powerful shield. And, of course, Greece is a country that does not cause problems or have expansionist ambitions that could stir trouble in its neighborhood. In this sense, the understanding that it represents a pillar of stability in the Balkans and the Eastern Mediterranean is no exaggeration; it is simply the factual truth.
In this respect, Greece has assumed a greater role than the one of the friendly neihbor and its role is pivotal to the US geopolitical plans for the region. The “Prespes Agreement” changed the dynamic between Greece and all of its northern neighbors. It’s no exaggeration to say that Greece is today probably the United States’ most important bilateral partner, working with all of these countries of the Western Balkans to continue their progress towards Euro-Atlantic reforms. Whether it’s on energy, defense cooperation between Greece and other NATO allies.
Focusing on close ties, quite recently the foreign ministers of Greece, Serbia and Cyprus discussed new opportunities for greater cooperation in energy, transport and tourism. Greece’s Foreign Minister Nikos Dendias said that its priority is the implementation of the “Joint Declaration” that was signed in the context of the 3rd High-Level Cooperation Council, which took place in December 2019, in Athens. Furthermore, he expressed the intention for the economic and trade relations to grow and deepen, along with the cooperation in important sectors such as energy and defence. Regarding energy, the foreign ministers discussed how to enhance connectivity between the countries in the region. And with regard to transport, mr. Dendias proposed a trilateral +1 meeting between Greece, Serbia, Cyprus and Northern Macedonia to discuss connectivity in the region.
The Greek Foreign Minister also said Greece is monitoring Turkey’s intentions in the wider region and the effort it is making to use economic, religious and cultural means to affiliate itself with countries in the region, and especially with the Muslim population. Finaly, in the context of the European perspective, he reiterated Greece’s undivided support for Serbia’s European perspective.
Recently, U.S. Ambassador to Greece Geoffrey Pyatt underscored the United States’ strategic commitment to northern Greece, while visiting the port of Alexandroupolis for the final phase of the inter-allied military exercise DEFENDER-Europe 2021. Ambassador Pyatt stressed that “throughout history, a stronger and more secure Greece has been important also to America’s interests, and enhanced defense cooperation between our two democratic nations deepens our bilateral relationship, strengthening the NATO Alliance, and promoting safety and security in this strategically dynamic region.“
This large-scale U.S. Army-led exercise, consisting of more than 28,000 multinational forces from 26 nations, is designed to build readiness and interoperability between the United States, NATO Allies, and partner militaries over a wide area of operations. In addition, DEFENDER-Europe 21 will include significant involvement by the U.S. Air Force and U.S. Navy. Together with the immense movement of troops and equipment through Alexandroupoli, U.S. has forces in the region supporting the ongoing Operation Atlantic Resolve, which included the deployment of the 1stCAB to Europe through Alexandroupoli in February, and the redeployment of the 101st CAB that began in March and continues now, concluding next week when 41 helicopters will transit back to the United States. The confluence of these exercises and the sheer volume of military activity now happening in this port underscores Alexandroupoli’s growing strategic importance to Greece, to the United States, and to NATO.
Greece staged, hosted, and participated in this important exercise, together with the U.S. Army in Europe and Africa, serving as a strategic security partner in the western Balkans and Black Sea regions, and demonstrating its pivotal role in the U.S. geopolitical plans to remain present in the Balkan and Black Sea regions, in order to provide deterrence against potential adversaries. This exercise utilizes key ground and maritime routes bridging Europe, Asia, and Africa, showcasing Greece’s critical geographic position at the nexus of three continents.
The strategic importance of Alexandroupoli’s Port as critical asset
The significance of the use of Alexandroupolis port by US forces in actions such as DEFENDER-Europe 2021, was reiterated by ambassador Pyatt who said that “this is a proof of our strategic commitment to northern Greece and of Alexandroupolis’ role as a military logistics hub, an energy hub, a regional access hub and a transport hub. I am very proud of the partnerships we have built, not just with respect to military cooperation and security, which is exceptionally important, but also, for example, in energy, with the FSRU, the natural gas power station, the IGB and TAP pipelines.” Alexandropouli is a region that has become strategically important for the strategic partnership between Greece and the U.S. in defence and security. The many joint exercises conducted in recent weeks highlight the accelerating tempo of the military-to-military relationship, which is anchored in the updated Mutual Defense Cooperation Agreement. Ambassador Pyatt has, on many occasions, underscored that the bilateral Strategic Dialogue and the update of MDCA “will continue to offer opportunities for mutually beneficial collaboration as we take our alliance to the next level under President Biden.”
Ambassador Pyatt has visited Alexandroupoli six times now, because this city plays a leading role in Greek-U.S. shared goals of increasing European energy security and regional stability. Alexandroupolis’ geostrategic location has been key to attract large-scale investments, including new infrastructure at the piers, facilities for a terminal regasification station, linkage to the railroad network and Egnatia Odos, and the continuing expansion of the region, where the NATO fueling pipe is located. These investments will turn the port city into part of a vertical strategic axis to the north for the speedy transfer of people and commerce.
The upgrade of the northern Greek port of Alexandroupolis to allow large ships to berth and heavy military equipment to be loaded and unloaded, has raised significant interest shown by U.S. companies BlackSummit and Quintana in the privatizations in Alexandroupoli and Kavala, noting that these ports support critical energy infrastructure in the region, including the Alexandroupoli Floating Storage and Regassification Unit (FSRU).
The FSRU is an important example of Balkan cooperation to diversify energy sources and route. Greece and Bulgaria are both shareholders in the FSRU, and North Macedonia now seeks to become a shareholder as well as joining Serbia, Bulgaria, and Greece in booking capacity in that facility. There is also a U.S. ownership stake in Gastrade, the company that’s developing the FSRU, in order to secure, among other advandages, that some of the FSRU contracts will go to American LNG suppliers.