China Power | Economy | Risk Intelligence

Demystifying China’s Role in Italy’s Port of Trieste

The ghosts of Chinese control or even ownership have haunted the port since a March 2019 MoU. But those concerns have always been overblown.

By Francesca Ghiretti for
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Demystifying China’s Role in Italy’s Port of Trieste
Credit: Wikimedia Commons/ Gigi26970

At the end of September 2020, Germany’s Hamburger Hafen und Logistik AG (HHLA) concluded an agreement with the Port of Trieste, in northern Italy, to invest in the development of the port’s logistic platform. The investment includes the acquisition by HHLA of 50.1 percent of the shares of the platform, with the rest belonging to Francesco Parisi S.p.A. (about 23 percent) and ICOP (22 percent), while the remaining shares will be held by Interporto di Bologna. In Europe, and in Washington too, the move has been welcomed as it dispels the ghosts of Chinese investments and the risks these might have implied.

In March 2019, the Port of Trieste was among the signatories to the Memorandum of Understanding (MoU) between Italy and the People’s Republic of China in the framework of the Belt and Road Initiative (BRI). The agreement signed by the Port of Trieste with China Communications Construction Company (CCCC) amounted to little more than a declaration of intent and goodwill for the development of future relationships between the entities. Nonetheless, the MoU of March 2019 opened the way for a more specific, and to a certain degree pragmatic, bilateral MoU between the Port of Trieste and CCCC, which was signed in Shanghai in November 2019. This latter MoU envisioned three areas of collaboration between the authority of the Port of Trieste and CCCC: one in Italy, one in China, and in one in third countries.

Despite the signing of the second MoU and the enthusiastic tones of the parties involved – which at times have caused misunderstandings in the public in regard to the size and scope of the agreement – the content had very limited and precise objectives, none of which envisioned the management, let alone the ownership, of the Port of Trieste by CCCC. Yet, both after the MoU in March 2019 and the one that followed in November, fear ran high that something similar to what happened to the port of Piraeus in Greece could repeat itself in the Italian port, leading to the expansion of China’s influence in the area. Such concerns were the result of two elements: miscommunication on the Italian side on the actual content of the agreement – content often inflated by some news outlets – and the climate of tensions that through the years has developed around Chinese investments in infrastructure projects.

In order to obtain some clarity and bring the debate back to facts, we must understand what was actually in the agreement between the Port of Trieste and CCCC.

As noted above, the agreement was composed in three parts; since the section concerning the presence of CCCC in Italy is the most complex we will take it up last. The part regarding the presence of the Port of Trieste in China comprised two offers. First, the participation of the Port of Trieste in a new logistic park in China, which would sell Italian products. The possible areas identified were Shanghai, Ningbo, and Shenzhen. Second, there was a option for Italian enterprises to sell their products on an online platform offered and already operated by CCCC. Similar offers were made to the other signatory of the MoU of March 2019, the port of Genoa, but they were not part of a follow up MoU.

Representatives from the Port of Trieste visited the areas where the logistic park could potentially emerge; however, the latest update shows that the agreement did not go any further than that. In a pattern too often seen with Chinese counterparts, promises were made but nothing followed. The offer made to Genoa had a similar destiny. Nonetheless, the Port of Trieste launched a pilot program for local enterprises in the wine sector to sell their products on the online platform offered by CCCC. The platform officially belonged to CCCC, but the governance of the logistic chain was entirely in the hands of the Italian sides, with a special role for the Port of Trieste. Unfortunately, we do not know how this partnership would have developed as the COVID-19 pandemic brought this effort to a pause, if not to an end.

In regard to the potential collaboration between the Port of Trieste and CCCC in third countries, the agreement envisioned the construction of a large intermodal terminal in the city of Kosice, Slovakia. This part of the agreement is still in motion, but, to the best of our knowledge, it has not come to a conclusion yet.

The part of the agreement that covered CCCC’s presence in the Italian port proposed an investment by CCCC in the already existing “Trihub” project for the reactivation of the Servola and Aquilinia stations, which are to be part of the new intermodal terminal just outside of Trieste.

The Trihub project began in 2017 and was born in a coordinated effort between the authority of the Port of Trieste and Italian Railways Network (RFI). Its aim is to develop the Trieste Campo Marzio station, the main infrastructure serving the port, and turn it into a larger hub connected systematically with the stations of Cervignano and Villa Opicinia.  The other part of the Trihub project regards the reactivation of the Trieste Servola and Trieste Aquilinia stations, which will allow for direct trains on the Venice-Trieste line. This is the part of the project in which the Chinese were to be involved.

These are all targeted projects aimed at bettering the rail connection of the Port of Trieste, which views rail connection as one of its strengths, but none of the above included Chinese intervention in the port itself. Furthermore, far from being a rogue initiative, the project was presented at the EU-China Connectivity Platform and received the greenlight from Brussels. So much so that the European Investment Bank loaned 39 million euros for the project to which the Connecting Europe facility added financing of 6.5 million.

Under the arrangement in the MoU, CCCC would have built the station of Trieste Servola and the port authority together with RFI would have managed it while paying rent to CCCC. Nonetheless, even before HHLA took a controlling stake in the development of the new logistic platform, little actual progress had been made. In any case, the MoU did not equate to giving the station to CCCC; there would still have to be an open public bid respectful of Italian and European regulations. However, to this day, CCCC is yet to present such a project proposal, and the new investment by HHLA suggests it might never do so.

Summing up, then: The Port of Trieste was ready to welcome Chinese investments to advance parts of an existing development project. This initial project could have led to further potential future investments. However, if the question is whether the Port of Trieste was selling the port to the Chinese or giving it to them to manage, then evidence shows that the answer is no. In Italy ports are of public ownership, and hence cannot be sold. Even in those cases where long concessions for management are made, these can be rescinded if the counterpart does not comply with the agreement. Finally, any infrastructure investments in Italian ports must go through public bids, meaning that in spite of the agreement between the Port of Trieste and CCCC, the latter (by itself or as part of a consortium) would have had to make the best offer and win the public procurement. For example, despite the March 2019 MoU with the port of Genoa, CCCC did not actually win the public bid for the construction of the new breakwater dam.

In conclusion, foreign investments always carry a risk and undeniably, there have been instances in which Chinese investments have led to an excessive ownership of strategic infrastructure by the Chinese counterpart. However, the process followed by the Port of Trieste embedded such an investment into a European framework and moved with more caution than often advertised. Ultimately, the case of the Port of Trieste shows that the debate on Chinese investments in infrastructure projects is often detached from data. Nonetheless, it is important to have such a debate in order to better understand the phenomenon and determine how to respond to it in the future.

Francesca Ghiretti is a research fellow at Istituto Affari Internazionali (IAI), where she specializes in Italy-China relationship, Europe-China relationship and Chinese foreign policy. She is a Ph.D. candidate at King’s College London, looking at Chinese FDI in the EU.