November 2021

In November our search through the media outlets of the wider Mediterranean region brought forth several insights on the Chinese economic and diplomatic engagement with the region at both a bilateral and multilateral level.

IRNA reported on a meeting between a high official from the Iranian Minister of Cooperatives, Labor and Social Welfare, Hamed Forouzan, and the Head of the Chinese Chamber of Commerce on developing business relations.[1] The meeting was also attended by several managers of Iran’s Social Security Investment Company (Shasta, or SSIC in the English acronym), the country’s largest public social security fund, which controls eight industrial and economic investment holdings. They submitted the plan of “a nearly-€10 billion project in the petrochemical sector” to be implemented in the framework of the Iran-China 25-year cooperation document by “using the capacity and power of economically active companies of the People's Republic of China.”

Against this background, Donya-ye Eqtesad published a comment on an OilPrice report claiming that Iran, China and Russia have finalized “a contract for the development of the new Chalus gas field, which is worth several trillion dollars.”[2] Allegedly, as authorities have not confirmed these claims yet, a recent Russian exploration of the Chalous gas field, located along Iran’s Caspian shores, has determined that the field’s gas reserves would total 7.1 trillion m3. This would in turn make Iran the holder of the world’s largest gas reserves. The new contract between Tehran, Moscow and Beijing, 40% of the shares would go to the Russian companies Gazprom and Transneft, 15% to the Iranian Khazar Exploration and Production Company (KEPCO), and 28% to the Chinese National Petroleum Corporation (CNPC) and National Offshore Oil Company (CNOOC), which would also provide the necessary banking facility, infrastructure and project engineering. According to OilPrice, Germany, Austria and Italy would also invest in the development of this project. Donya-ye Eqtesad pointed out that, if OilPrice’s claims are correct, China, Russia and the European countries involved would “will need to lift sanctions on Iranian oil, gas and banking sectors to make this possible,” as well as reach an agreement during the on-going negotiations in Vienna.

News about possible important Chinese moves also come from Lebanon as the country is keen to expand cooperation with China, as stated by the Chairman of the Tripoli Chamber of Commerce during his meeting with the Chinese Ambassador to Beirut. Possible joint projects in Lebanon’s North Governorate were at the center of their discussion.[3] In this context, Tamara Berro, a researcher of China-Arab relations at the Lebanese University writing for al-Mayadeen, called for Lebanese authorities to not pay attention to the Western media’s attempt to distort China’s image through the “debt-trap diplomacy” narrative.  Berro underlined that China’s interest in investing in Lebanon is serious, as the country has a strategic importance for China due to its position along the New Silk Road. She mentions the announcement made by Ali Hamiyah, Minister of Public Works and Transport, about the visit of a delegation with the Chinese company CMC to expand the ports of Beirut and Tripoli.[4]

In comparison, the situation is not as good in countries where Chinese companies are already operating, such as Greece and Israel. Ta Nea reported the concerns expressed by American media in an interview of Prime Minister Kyriakos Mitsotakis with the Washington Post.[5] Mitsotakis was asked why Cosco was allowed to increase its shares of the Cosco-Piraeus Port Authority (PPA) to 67%, and whether he was worried that China’s economic presence in a location “of the highest strategic importance for Europe” could be translated into political and military influence “as has happened in many Asian countries and islands.” In response, the Greek Prime Minister reiterated the importance of the strategic alliance with NATO, despite Athens’ good relations with China. He also emphasized that “the sale of the port of Piraeus took place at a time when few countries were interested in investing in Greece.” In any case, the concerns of the civil society over the actions of Cosco remain, as explained by Nikos Mpelavilas, Professor of Urban Planning and History of the City at National Technical University of Athens.[6] In his assessment of the situation for the newspaper Left, the academic pointed out that the privatization of the port has a long history. While in2008, the Greek government and public opinion were favorable, or at the least open to compromise with Cosco, “the ‘laissez-faire’ approach of the Mitsotakis government since the autumn of 2019” allowed “the Chinese to operate outside European regulations in terms of environment, labor and competition,” At the same time, Cosco “was given the opportunity to ‘lock’ all profits behind the gates of the port of Piraeus or transfer them directly to Shanghai.” Mpelavilas argues that Cosco’s lack of commitment to the local administrations, workers’ rights, and environmental policies has gone well beyond what the public could tolerate. The only way forward would be for Cosco to return “operating within terms of European legality, rights, obligations and deliveries.” Meanwhile, the Israeli newspaper Globes reported that Israel Supreme Court rejected a petition issued by the Association of the Israeli Builders of the Land against the Committee for the Reduction of Concentration and the Association of Chinese Companies in Israel.[7]The petition claimed that “the state encourages, or alternatively does not prevent, the takeover of the country's major and major infrastructure projects by Chinese companies, thereby harming Israeli contractors and companies,” and that “all Chinese companies operating in the field of infrastructure in Israel […] are directly or indirectly owned by China’s Government.”  

While growing scrutiny might create problems to Chinese companies, it might also create opportunities for others. Indeed, Turkish media reported that the Head of the Italian Chamber of Commerce, Livio Manzini, stated that trade between Italy and Turkey should reach USD 30 billion in 5 years.[8] This result, he stated at the “Italy-Turkey Commercial Relations in the Post-Pandemic Period” forum that was held in Istanbul, should also be made possible by the growing interests by Italian companies to find alternatives to Chinese producers for the components of their products.

In fact, the issues connected to value chains and decoupling in general are priorities for several European countries. For example, writing for Le Monde, the French economist Mary-Françoise Renard discussed whether it is actually possible, or desirable, to decouple the French and Chinese economies. According to the scholar, although France’s dependency on China is moderate (4% of its exports and 7% of its imports), the strategies and the costs of an eventual relocation of French industries in the national territory may vary greatly from sector to sector.[9]Renard argues that decoupling from China will fail if French companies went to China in the first place to gain access to the Chinese market and/or reduce the environmental and labor costs. On the contrary, the relocation back to France could work if costs and access to the Chinese market were not the main drivers of the presence of French companies in China, and it should be especially encouraged in the case of companies operating in strategic sectors. Moreover, in order to limit dependence on China, France and the European Union cannot rely solely “on more regulation and control.” It is necessary to develop “national and European strategies, sector by sector, vis-à-vis any foreign partner, and not only Chinese.”

Against this background, both French and Italian media published articles on the issue of semi-conductors. Le Monde, supported by the analysis of the economic intelligence firm Datenna, lamented the takeover of a French company, Unity Semiconductor SAS, by the Chinese investment fund Wise Road Capital, of which several shareholders have apparently closed ties with the Chinese government.[10] The German Huba Control and the Austrian AMS have faced the same fate. The French newspaper claims that Beijing is trying to take control of the semiconductors industry “as a tool for its technological rise.” Moreover, as semiconductors have become essential for the global industry and their production “is concentrated in only a handful of countries,” then, “the slightest shortage can disrupt many supply chains around the world.” The newspaper also pointed out that it is still difficult to have a clear picture of Chinese investment in Europe despite the new relevant European regulations. In the same context, Italian media reported on the decision of the Italian Premier Mario Draghi to use the so-called Golden Power Law to block the joint venture between the Chinese Zhejiang Jingsheng Mechanical, a microchip component manufacturer, and the Hong Kong branch of the American Applied Materials, leader in the production of software for semiconductors, from acquiring the Italian branch and the screen printing activities of the US group.[11]This is the third time that Draghi intervenes in these kind of situations.

European media also covered the development of the Chinese diplomatic engagement in Africa. Le Monde reported the views of the Sinologist Thierry Pairault on the Forum on China-Africa Cooperation, which was downgraded to a ministerial conference instead of a summit like in the previous editions.[12] According to Pairault, this downgrade reflects the growing frictions in Beijing’s relations with the African continent despite the impressive investment and trade volume in the past 20 years. Pairault claims that the level of satisfaction with China in several African countries is decreasing due to “limited impact of many projects, unbalanced trade exchanges along the North-South divide, the debt, corruption among the elites, violations of work rights violated in Chinese plants.” However, Paul Nantulya, a researcher at the Africa Center for Strategic Studies, suggests that these complaints might creep into the debate at the forum and that “China's objective interest is to take corrective measure.” Yet, it seems that frictions between Chinese and Africans have translated into a recovery of European influence in the southern part of the wider Mediterranean region. Indeed, many Spanish media outlets complained that most African countries chose to ditch the Forum of the Union for the Mediterranean in Barcelona in order to attend the FOCAC. These included Nasser Bourita and Ramtane Lamamra, the Ministers of Foreign Affairs of Morocco and Algeria, with whom Spain has open quarrels and hoped to address during the meeting.[13]

We conclude this issue of the ChinaMed Observer with the discussion of how competition between China and the United States is being perceived in the region. Maria Maʿluf, writing for the Saudi newspaper al-Riyadh, points out that China would not try to replace Washington’s role in case of a complete US withdrawal from the Middle East.[14] There are several reasons for this. First, Maʿluf states that Beijing has learned the American lesson in Iraq and Afghanistan, and it will not risk losing its economic and diplomatic achievements by increasing the level of its political and military intervention. Moreover, China itself benefits from American-provided security goods in the region, and it does not want to pay the cost associated with replacing the United States as dominant power. Finally, the journalist highlights that the rivalry with the United States has put more pressure on China to “push Washington out of Asia,” thereby limiting the resources that Beijing can invest in the Middle East. In this regard, the Iraqi Al-Bayan Center for Planning and Studies published an interesting note authored by the Palestinian scholar Ayyad al Butnyji, who called for a different approach to the US-China competition.[15] Al Butnyji states that, at least for the Arabs, a shift of power from West to East, with China gaining the hegemony of the international system, would not make much difference. This is because the situation would remain the same with the region dominated by one single external power. He suggests that “China seeks to consolidate its relationship with countries along the Belt and Road Initiative, and to increase its economic, strategic and diplomatic participation with the countries of the Middle East, North Africa and Central Asia, because that is the only option left as result of growing pressure in Asia and the Pacific.”