Analysis – France expected to beat China in the race for the Port of Beirut – Hezbollah is the main obstacle

Beirut, Lebanon (PortSEurope) October 27, 2020 – Two months after the deadly explosions that destroyed most of Beirut port, Lebanon’s largest, it is increasing clear that the main foreign contenders to rebuild the geopolitically strategic facility in the Eastern Mediterranean will not invest hundreds of millions dollars/euro in a country where the predominant power is the Shi’ite movement Hezbollah. Hezbollah, acting as a spearhead for Iran in Syria’s civil war and across the region, is also facing public anger over the explosion in the port that obliterated part of the city and traumatised the country. The Shiite Muslim party Amal has the most influence in Beirut’s port, where 70% of the 3,000 employees are Shiite. Amal is an ally of Hezbollah. France tops the list of candidates to rebuild the port (and part of the city), followed by China, Turkey, Russia, Kuwait and the United States. The detonation on August 4 of some 2,700 tonnes of unsafely stored ammonium nitrate that killed almost 200 people, injured 6,000, left over 300,000 without proper housing and with damages estimated at $15 billion, fueled outrage over government corruption, incompetence, negligence and inaction. Hezbollah is seen as protecting a corrupt political class that has driven Lebanon into the ground. Hezbollah is both a political movement and a guerrilla army. It has been designated a terrorist organisation by the U.S., Canada, Germany, Britain, Saudi Arabia, the United Arab Emirates, Bahrain and Kuwait. The EU classifies Hezbollah’s military wing as a terrorist group. The Port of Beirut is among the 10 most important seaports in the Mediterranean Sea and has long been seen as the gateway to the Middle East. It managed surprisingly to resume operations at its container port only four days after the explosions that flattened the harbour front and surrounding buildings. Seismologists measured the event, which blew out windows at the city’s international airport 9 km away, as the equivalent of a 3.3 magnitude earthquake. The port handles 60% of all Lebanon's imports. The country, suffering from a prolonged economic crisis, the massive spread of the coronavirus and rampant corruption, relies heavily on imports, especially for food supplies. It is very likely that Lebanon will adopt a build, operate and transfer (BOT) model for the renovated port in order to allow the investors to recover their investments. France has historical and cultural ties to Lebanon. It is consistently pushing for reforms in the country and sees some form of control over Beirut port as a strategic asset. French President Emmanuel Macron returned at the end of August for his second visit to Beirut in three weeks as he tried to force Lebanese political parties to agree to painful reforms to fix the country’s economy. French involvement in the port could increase if a French company takes over the management of Beirut’s container terminals. The British-Lebanese venture Beirut Container Terminal Consortium (BCTC) 15-year contract for the management of the container terminals came to an end in early 2020, and a public tender for another 15-year period was supposed to be issued for a new contract. It was delayed possibly to early 2021 because of the explosion. BCTC has submitted a tender for a renewal of its management contract. It is bidding in a consortium with Lebanese-based International Port Management Beirut (IPMB), British-based Portia Management Services (PMS), and American-based Logistics and Port Management, Americas (LPMA). The other company to show interest in the new contract was French shipping group CMA-CGM (Compagnie Maritime d'Affrètement and Compagnie Générale Maritime) in a partnership with Geneva-based MSC (Mediterranean Shipping Company), a global business engaged in the shipping and logistics sector. Interest was reportedly also declared by Gulftainer (United Arab Emirates - UAE), Hutchison Ports (Hong Kong), and state-controlled China Merchants Port (CMPort). Gulftainer currently operates a container terminal in Lebanon’s second port, in Tripoli (North Lebanon), via a local subsidiary, Gulftainer Lebanon, part of the capital of which is also owned by CMA-CGM. Gulftainer is a privately owned, independent port management and 3PL (third party logistics) company and a leading port operator in the Middle East. The majority shareholder in BCTC is Mersey Docks, a British company which was acquired in 2005 by Peel one of UK’s biggest private property companies. Its international arm, Portia Management Services, replaced Mersey in managing BCTC. Portia’s chief executive, John Owens, owns a small personal share in BCTC. BCTC’s main partner is the Lebanese company International Port Management Beirut Holding. The U.S. firm Logistics and Port Management Americas, owns the smallest share of BCTC. Chinese companies are interested in Beirut port because of the complications of shipping through the Israeli port of Haifa to Arab countries due to historic political tension, she said. The state-owned Shanghai International Port Group (SIPG) is set to operate the Bay terminal at Haifa port for 25 years starting in 2021. Ita is also interested in a further concession at the port. In case the Lebanese refuse reforms as suggested by France and limit the Hezbollah influence in the port, the only choice left for them will be to turn to China which will rebuild the port fast and cheap, and will not mention reforms and changes. With Chinese companies controlling Alexandria port in Egypt, Haifa in Israel and Piraeus in Greece, securing a foothold in Lebanon would establish China’s domination over maritime trade routes in the Eastern Mediterranean. Such a development will fit perfectly into China’s Belt and Road initiative. One Belt, One Road – a simplified version of the Silk Road and 21st Century New Maritime Silk Road – concerns the China-led infrastructural investment project which aims to symbolically revive the corridor that united the East and the West. This initiative covers more than 60 countries and regions from Asia, through Eastern Europe and the Middle East to Africa. The question is whether China wants to invest more money in Lebanon after it has seen much of the traffic usually passing through Beirut port being redirected to the port of Tripoli, which Beijing has rehabilitated for its own use. A Chinese engineering company has been working to create a berth to accommodate Chinese made cranes capable of moving about 700 containers per day. Accepting a Chinese investor for the port would also alienate the U.S., which is already displeased by the China’s involvement in Haifa. France undeniably stands out as the natural choice due to its historical and cultural ties to Lebanon and the Franco-Lebanese roots of CMA-CGM. Paris has imposed itself as a leading force in managing the crisis: it deployed its military capacities to assist Lebanon in the aftermath of the explosion, co-organised an international aid conference with the United Nations and prepared a draft proposal for reforms to Lebanon’s political parties. French investments would not provoke tensions with the U.S. or outrage from the population. France could be joined by the UAE. Turkey declared its interest in the Port of Beirut reconstruction only four days after the explosion. It does not control any ports in the area apart from in Turkey and Beirut, and Beirut represents an opportunity for Ankara to broaden and solidify its sphere of influence, which is a key priority for Turkey’s President Recep Tayyip Erdoğan. But analysts view Erdogan’s empire building ambitions as one more incentive for France to take over the port. Only days after the explosion, Kuwait pledged to rebuild its grain silo, Lebanon’s largest, which was originally financed by a Kuwaiti development fund in 1969, but it’s unlikely that Kuwait will invest further in the port. The grain silos and the entire grain terminal of the port were destroyed in the explosion. The silos have a total capacity of 120,000 metric tonnes (mt) of grains. The silos consisted of 48 large cells, with a capacity of 2,500 mt each, and 50 small cells with a capacity of 500 mt each. They are also used as a strategic storage for Lebanon, with about 85% of the country’s cereals stored there. Another potential investor in the rebuilding of the port could be Russia, which would also be comfortable in working with Hezbollah, but it lacks money for such an investment. The story behind this huge amount of explosive material rotting in a poorly secured and maintained warehouse in the port of Beirut is like one coming from a bad film: It was on board of a Moldova-flagged ship, owned by a Russian believed to be living in Cyprus, which was travelling from the ex-Soviet republic of Georgia, to be delivered to Mozambique, but was abandoned in the port in 2013. Copyright (C) PortSEurope. All Rights Reserved. 2020.

Analysis – France expected to beat China in the race for the Port of Beirut – Hezbollah is the main obstacle

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Analysis – France expected to beat China in the race for the Port of Beirut – Hezbollah is the main obstacle

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