China, Germany's Hamburg port terminal deal risks derailment; know why

As the German security authorities on Tuesday declared the Hamburg container terminal as "critical infrastructure", German Chancellor Olaf Scholz's plan of selling parts of it to Beijing barrelled to a standstill. Last year, Berlin had agreed to China's state-owned firm Cosco for buying a stake in a Hamburg port terminal in spite of the backlash. Cabinet stood in the way of the deal, arguing that the "reason for the partial prohibition is the existence of a threat to public order and safety", according to the German Ministry of Economy and Climate Protection's press statement.

The German-Chinese nature agreement turned contentious as Scholz was attempting to wean Berlin off Russian energy imports, but ended up risking dependency on Beijing. Lawmakers in Germany, unabiding to their predecessor Angela Merkel’s firmly trade-first approach, have been wary of Beijing's tactics of infrastructure control, a strategy critical to the latter's expansionist Belt and Road trade initiative for solidifying its iron grip as an international political power. PRC turned to infrastructural, transportation and logistical investments and other 'Trojan horses' projects as the external demand for its exports went downhill since 2006, particularly in developing nations. 

The tussle between Social Democrat Scholz, a former Hamburg mayor who backs the Cosco deal, close Scholz ally Peter Tschentscher, and their coalition partners the Greens and the liberal FDP, took turn for the worse as at least six German ministries are threatening to veto the sale. Despite all the noise, China has remained Germany’s biggest trading partner in 2021, and the biggest single source of imports for the sixth consecutive year. Scholz, in retrospect, has been grappling with the fallout due to Beijing's allegiance with Russia, which declared an all-out offensive on Europe's eastern flank. 

Credit: AP

Coerced to reassess China deal's future prospects

While Scholz, despite the pushback from lawmakers finalised the sale during his “exploratory trip” in 2022 to find out “where China stands, the German Federal Office for Information Security's rampant classification of the terminal as "critical infrastructure" implies reassessing the deal's future prospects.

Germany might have to ban the Chinese acquisition of the minority stake in the Tollerort terminal in the Hamburg port and rethink the whole deal. Since October last year, Chancellor Olaf Scholz has been staunchly resisting calls to ban the sale outright. Initially, it was agreed that Chinese shipping group Cosco would purchase a larger 35 percent stake in the port, later a compromise agreement was reached with a consensus for a smaller stake in the operation of the EU's biggest container terminal.  

"Since the conditions have changed, we are examining what impact this will have on the situation," a spokeswoman for the German economy ministry said at a press conference on April 12. She, however, refused to discuss the outcome of the review.

While it was made apparent that the bilateral deal might pose a national security risk, German chancellor Olaf Scholz's Cabinet still decided to officially permit the China-based COSCO Shipping to acquire a 24.9% stake - over formerly decided 35% — in the Tollerort terminal of Hamburg port logistics company HHLA. Germany's economic affairs ministry explained the decision at a conference, saying that the stake by COSCO in the terminal will be a "strategic investment" and that it "reduces the acquisition to a purely financial investment". The economic ministry argued that the one-quarter threshold will not be exceeded without a prior investment review process.

This led to a political dispute within Berlin's cabinet as several lawmakers cited the consequences for the entire of Europe due to Germany's increasing reliance on Russia for energy.

Green party and the Free Democrats, which formed the country's governing coalition last year with Scholz’s Social Democrats, derided the proposal with the Chinese firm. Six German government ministries rejected to agree to such a move stating that the COSCO, already the port’s biggest customer, would get too much leverage. They argue that China is intending to "politically instrumentalise" Germany's and Europe's critical infrastructure.

A joint investigation by German public broadcasters WDR and NDR, and the daily Süddeutsche Zeitung reported on a new security assessment yesterday and the sudden classification of the terminal. The declaration is aimed to coerce Berlin into re-evaluating its economic binding with US archrival China. "The port was reclassified as critical infrastructure by the Federal Office of Information Security (BSI) at the "start of 2023", the operator HHLA confirmed in an official statement to the agencies, including DPA. The German parliament, last November, similarly blocked the sale of two chipmakers to Chinese investors, as well as capped investment guarantees for German companies who do business with China citing 'national security' concerns.