Monday, 5 June 2017

Wikileaks: Greece and the not so inscrutable Chinese

I've been reading some of the Wikileaks documents that Greek daily Ta Nea has been publishing. The extracts below relate to Sino-Greek relations (in view of the 2008 visit to Greece by Chinese leader Hu Jintao) and the COSCO saga – i.e. the agreement for the Chinese shipping and logistics company to operate a terminal at the port of Piraeus. What is revealed – if the US embassy in Greece is to be believed – is how feeble and fatalistic Greece's diplomats are when it comes to defending the country's interests – China abuses and insults Greece, and like a battered wife Greece feels it can do nothing other than accept its punishment –  and how imminent privatisation deals in Greece will likely be done.

The document from Ta Nea continues with another cable on Greece's doomed efforts to reform and liberalise the country's economy, but I've only included the opening remarks by the Americans regarding COSCO developments and the description of the workings of the mafia-type port authority trade unions. If the Greek people were wondering why their economy is a basket case, they would be advised to turn their attentions and ire not only on Goldman Sachs, the IMF and the country's politicians but also on the unbelievable (at least, to those of us exposed to Anglo-Saxon/northern European economies) unsustainable and crooked industrial practices that have developed in Greece since 1974.

Click here for Ta Nea's summary in Greek and within the document click where it says ‘Διαβάστε εδώ τα σχετικά τηλεγραφήματα του Wikileaks’ for full English-language Wikileaks document.


2. (C) People's Republic of China President Hu Jintao paid a state visit to Greece November 24-26.  This was the first visit to Greece by a PRC Head of State since 2000.  Greek President Papoulias had visited China in June; PM Karamanlis last visited China in 2006.  During the Athens visit, Hu met  with Papoulias, Karamanlis, and the heads of the main opposition PASOK party and the Communist Party of Greece (KKE).


3. (C) In a readout for us of the visit, Chinese Embassy Political Counselor Liu Wei said the Chinese had three goals. The first was to repay Greece for the visit of President Papoulias to China and the support Greece had shown to China with the Olympics.  Wei said it was important to the "Chinese mentality" to show gratitude…

4. (C) The second goal was renewal of Greek-Chinese friendship. Wei said Greece and China were not allies, as Greece and the U.S. were -- China did not make such alliances with foreign governments.  But Greece and China were "comprehensive strategic partners," as established in their 2006 agreement.  Wei defined precisely what that meant: "comprehensive" referred to the fact that China and Greece would agree on issues across the board and not cherry pick when it was convenient.  Their partnership at the same time was "strategic" because it focused on the global context and was long-term, not simply a marriage of convenience for the present.  Wei said Greece was the "most adamant" supporter of the one-China policy in the EU, and China was a strong supporter of the reunification of Cyprus. Such a convergence of views, he argued, made Greece and China "natural partners."  Greece was one of China's strongest advocates in the EU, and the Chinese President promised during the visit that China would never do anything to harm Greece.

5. (C) Expanding "pragmatic cooperation," that is, economic and business interaction, was the third Chinese goal.  Wei indicated China wanted to "go global" but had had problems in securing a foothold in Western countries due to mistrust. Such mistrust did not exist in Greece, according to Wei, and increasing economic ties between China and Greece was an important step for China.  Wei said that half of Chinese exports were carried on Greek-owned vessels, while 60 percent of China's oil imports arrived on Greek ships.

6. (C) During the visit, PM Karamanlis signed an agreement granting the Chinese firm COSCO Pacific Ltd a 35-year concession on the container terminal at the port of Piraeus. Under the agreement, which China was awarded in June and which represented the largest-ever such deal with a foreign power to control such an important aspect of the Greek economy, COSCO would pay 4.3 billion euro over 35 years and would renovate one pier and build another.  Wei admitted that the Chinese saw some difficulties in managing the Piraeus operation, due both to the global economic downturn and to Greek labor unrest. Greek dock workers continued to strike at the prospect of job or salary cuts under Chinese management, though Wei said China intended to have only one Chinese national running the container operation with an otherwise entirely Greek staff.  Additionally, four other minor agreements were signed, including two removing obstacles to Greek agricultural imports to China (Wei said Greek agricultural imports were quite expensive compared to domestic Chinese products but were nevertheless necessary in the production of high-quality goods for export.)  Other agreements covered cooperation between the Hellenic Telecommunications Organization (OTE) and the Chinese microchip supplier HUAWEI, and the sharing of programming between Chinese television CCTV and the Greek State-owned television ERT.

7. (C) Finally, when asked about potential military sales, Wei said there had been no such discussion during the visit. (NOTE: Greece has often helped cement deals or agreements in other areas through military equipment purchases.  For example, at the same time that Greece was sealing the Southstream gas pipeline deal with Russia, it also agreed to purchase more than a billion dollars worth of Russian armored personnel carriers (BMPs).  END NOTE.)  China was "very prudent" in arms sales and did not want to upset the balance between Greece and Turkey.  "Do no harm" was China's first rule in arms sales.


8. (C) The Greek readout, provided by MFA A10 Directorate for Asia and Oceania deputy head Adam Adamidis, while covering the same basic territory as Wei's readout, was less positive and more cynical.  Adamidis said the Chinese had "imposed" the visit on Greece, providing only a month's notice, which forced Greece to cancel or delay some other high-level meetings, such as the visit of the Cypriot President.  This was in contrast to Papoulias' visit to China in June, for which the Chinese had required a year's preparation.  It was not clear why the Chinese had forced their President on the Greeks at short notice, though apparently they wanted to conclude the COSCO port concession agreement as quickly as possible.  Adamidis said the COSCO agreement had been stuck in the Greek bureaucracy for some time, but the visit had forced it out.

9. (C) During the visit, President Papoulias discussed most of the political topics, while PM Karamanlis confined himself to economic matters.  The COSCO concession, Adamidis said, had been Karamanlis' idea.  (NOTE: Press reports early on indicated that the Piraeus port concession was to be done by an open and fair competition, though as it developed politics may have played an increasingly significant role.  END NOTE.)  Adamidis took exception to the Chinese interpretation of the "comprehensive strategic partnership," saying that while Greece and China agreed on many things now, that certainly did not mean they would agree forever or on everything.  At the same time, however, he conceded that Greece was in a "subordinate position," due to its very large trade deficit with China: 12 billion euro, plus Chinese shipyards were building 20 billion euro worth of Greek ships. Greece accordingly generally supported positions of importance to the Chinese. Adamidis noted Greek support for China's receiving Market Economy Status in the world of trade and for lifting the EU arms embargo.  Also, unlike most other EU countries, Greece did not have an office in Taiwan, and Greece kept a low profile on human rights issues in China, for which the PRC was grateful.

10. (C) The Greeks clearly did not believe this show of support for China was reciprocated. Adamidis noted President Papoulias' discussion with Hu on the Macedonia name issue. He said Papoulias had told President Hu, "We support you on Taiwan, Tibet, and Market Economy Status, but we need your support on FYROM."  Papoulias went on to note that Greece had been "furious" at China for being the first member of the UN Security Council to recognize "FYROM" by its constitutional name (1993). The Chinese reply was "We are going to accept any decision by the two parties for a mutually acceptable solution." The Chinese President had also warned Papoulias that if the Dalai Lama were permitted to visit Greece, it would have a "severe impact" on bilateral relations. Adding to this list, Adamidis mentioned with some disfavor as well that in the runup to the Olympics in China, the Chinese had agreed to have Greece help with security at the games but as the event approach, "they dumped us."

11. (C) Summing up, Adamidis said the Chinese had become much more "aggressive" of late.  A few years ago, they treated Greece with more respect, but now they sought to impose their wishes on Greece.

12. (C) COMMENT: Due to its subordinate economic position stemming from its trade deficit and outstanding ship-building contracts with the Chinese, Greece apparently feels compelled to support Chinese positions on a range of international issues.  But Greece evidently is not getting what it thinks it deserves in return, and the Greeks do not appear happy with the relationship. PM Karamanlis may be trying to turn this situation around with the concession to COSCO on the Piraeus container port -- assuming that the MFA report is true that he and not a competitive bidding process was ultimately responsible for the Chinese getting the concession.  As is the case with Russia, the GOG appears willing to make concessions on current business deals to secure a better position later.  But whether such a strategy will work -- either with China or with Russia -- may not be clear for some time.


=======================CABLE ENDS===========================

SUBJECT: Greece: Government Manages to Suspend Port Strike, But For
How Long and At What Cost? 

1.  SUMMARY:  Confronting its first major challenge since taking office, Greece's new PASOK government negotiated a temporary suspension to a dockworkers' strike on October 17.  Latching onto PM Papandreou's pre-election promises to re-examine privatization agreements, dockworker unions at the port of Piraeus went on strike October 1, demanding that the government scrap a concession deal granted to the Beijing-based China Ocean Shipping Company (COSCO) Pacific.  COSCO is a shipping conglomerate scheduled to take over management of one of two existing cargo terminals on October 1 and to rebuild and manage a third terminal currently not used. The tentative deal to suspend the strike, about which few details are known, ended a 16-day saga that had paralyzed Greece's busiest commercial seaport, cost businesses and the government tens of millions of euro in lost revenue, and stranded over 10,000 shipping containers.

 2.  SUMMARY CONTINUED. On the surface, the suspension of the strike appears to be a win for the new government.  But it was not the decisive pro-business, pro-competition conclusion for which many affected business and potential investors had hoped, and it remains unclear what the government promised dockworkers to go back to work and whether it can deliver. Despite the suspension of the strike, and depending on any further negotiations, the PASOK government will continue to face challenges placating the powerful dockworkers' union as well as other labor groups looking to exploit the government's pro-labor leanings. More significantly, PASOK's apparently ambivalent approach to upholding the terms of the COSCO contract--signed by the previous government and approved by Parliament--raises fresh doubts over Greece's ability to attract and retain foreign investors in the midst of a global financial crisis that is forcing all to compete for a dwindling and increasingly risk-averse pool of foreign direct investment (FDI). In a battle that serves as a microcosm for the innate tensions in Greece between social democratic instincts and efforts to modernize and make the economy more competitive in order to attract much needed foreign investment, the victor remains elusive.   

COSCO: A Controversial Privatization from the Start

3. In November 2008, in the presence of former ND Prime Minister Kostas Karamanlis and visiting Chinese President Hu Jintao, COSCO and the Piraeus Port Authority (OLP) signed a landmark 4.3 billion euro (6.4 billion USD) port privatization deal granting COSCO up to a 35-year concession to manage one of two existing terminals and to rebuild a third terminal at Piraeus, Greece's largest port, near Athens, and the top container port in the eastern Mediterranean. Under the terms of the contract, COSCO's Greek subsidiary was granted, after a transition period, the right to manage all shipping transactions at terminals II and III. In exchange, COSCO promised to: a) retain for the time being all employees that currently work at the two terminals it will oversee (approximately 600 out of OLP's current Piraeus workforce of 1,500); b) invest millions of euro to upgrade the terminals' container-handling capacity, more than doubling the port's current capacity, thus creating 1,000 new jobs; and c) reserve 10 percent of new hires for the qualified children of current unionized OLP employees.  OLP, in turn, would retain exclusive control over the operations of terminal I. In the view of the Athens Chamber of Commerce and Industry (EBEA), this landmark deal was a win-win for all parties.  For the GoG, which managed to achieve a major agreement prior to the onset of the financial crisis in Greece, the privatization and resulting expansion of port capacity was seen as helping to create greater role for Greece in Mediterranean shipping and transport. Export and import businesses and consumers hoped to benefit from increased port competition, which would decrease processing fees and reform the inefficient and corrupt offloading process, bringing down shipping costs and the cost of consumer goods over time. For labor in general, the deal maintained intergenerational job security and provided the possibility of new jobs.

4. Dockworker and port authority employees' unions, which had been calling intermittent complete and partial strikes and refusing to work overtime and weekends since the government announced the international tender for the port's operations in early 2008, immediately criticized the deal in November and continued to refuse to work overtime or weekends. Coinciding with the negative effects of the global economic crisis on shipping worldwide, strike action resulted in the Piraeus port suffering the biggest decline in container traffic among the world's 100 busiest ports,  caused several major shipping companies to temporarily forsake Piraeus for the Greek port of Astakos and other European ports, and increased the cost of transported consumer goods as a result of higher transport and processing costs.  While no specific statistics are available, EBEA indicated to DepEconCouns that many Greek export businesses were forced out of business as a result of delays and increased costs.

Dockworker Unions:  A Powerful, Corrupt Monopoly

5.The Dockworkers' Union and the Federation of Greek Port Personnel (OMYLE) have long held a labor monopoly over the operations of Greece's two major ports in Piraeus and in Thessaloniki.  Controlling exclusive contracts with the Piraeus Port Authority (OLP), the unions have reaped substantial financial benefits, with ironclad job security, guaranteed hiring privileges for the children of union members, and annual dockworker salaries in the range of 90,000 to 140,000 euro (135,000 to 210,000 USD), once overtime and other benefits are factored in--far above the average Greek yearly salary of 32,280 USD (National Statistics Services of Greece, data for 2008). According to union contacts, EBEA, and media reports, dockworkers also benefit from systematized corruption, manipulating the customs processing bureaucracy to expedite the containers of shippers who pay an extra fee--or holding up imports for those who refuse. All of this translates into what EBEA describes as the most expensive port in Europe in terms of fees and costs for shipping companies, importers, and exporters.  Privatization and competition would change all this and lessen opportunities for rent-seeking behavior.  Post's union contacts described the COSCO deal as threatening long-established dockworker salary levels and inter-generational job security, as OLP will need to cut costs in some way in order to stay competitive with the COSCO-operated terminals. Union officials noted that while they traditionally wield powerful influence within PASOK, they were willing to fight any government seeking to reduce their benefits…