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NATO warns allies to block China buying spree

Teri Schultz
April 17, 2020

Will the financial fallout from COVID-19 make European infrastructure vulnerable to the Chinese government's checkbook? Some experts warn that Europe is already in precarious straits. Teri Schultz reports from Brussels.

Belgien Treffen NATO HQ
Image: NATO

No less than the former head of Britain's foreign intelligence service is sounding the alarm.

"We need to do more to protect Western technology from being bought up by Chinese companies," John Sawers, the former chief of Britain's MI6, told Sky News this week. "I don't think it's an existential threat in the way the Soviet Union was in the Cold War, but nevertheless there is going to be deep rivalry over control of technology."

Sawers' comments were sparked by reports that a British semiconductor chip designer, Imagination Technologies, could be moved to China. The company was purchased in 2017 by a private equity firm backed by the Chinese government. These concerns come on top of the Trump administration's widely shared worries about European partners using China's Huawei to expand their 5G networks.

While Europe's economic relations with China continue to move forward cautiously, now that economies are facing a massive downturn caused by the COVID-19 pandemic, both NATO and EU officials are warning governments to guard against a potential Beijing buying spree on critical infrastructure.

NATO: Protect national 'crown jewels'

NATO Secretary-General Jens Stoltenberg, speaking after a virtual meeting of defense ministers Wednesday, noted that the "geopolitical effects of the pandemic could be significant" if economic difficulties made "some allies more vulnerable for situations where critical infrastructure can be sold out."

He said ministers had discussed the point that "resilience" is enshrined in Article 3 of the alliance's founding treaty and talked about "making sure that we have resilient, critical infrastructure, industries, and that we are able to, for instance, provide critical equipment during crises."

In an online conversation Thursday, Stoltenberg's deputy, Mircea Geoana, explained this further in response to a question from DW about hard decisions ahead for cash-strapped European governments.

"Of course, every national sovereign government has to decide which are the strategic industries they would like to retain," Geoana said. "Free markets need to continue to operate, but you have to make sure [of] the crown jewels, the … industries and infrastructures that are indispensable for making sure we stay safe irrespective of the circumstances."

He says NATO will be stepping up its communication with allied governments to underscore that, "We have to be aware that if we touch those minimum requirements, minimum capabilities at the national level and ally level, then we could be in trouble."

A surge of Chinese splurges

But some experts warn that Europe is already harboring plenty of potential trouble. 

Frans-Paul van der Putten, a senior fellow at the Clingendael Institute in The Hague who coordinates its China Center, lays this out in striking detail in a recent report

Van der Putten notes that the Chinese government-owned COSCO has controlling stakes in container terminals in Piraeus, Greece, operating two of the port's three terminals via its wholly-owned subsidiary, Piraeus Container Terminal, and has operational control of the third terminal via its 51% stake in the Piraeus Port Authority. In Zeebrugge, Belgium, COSCO owns 90% of the only terminal operator. In Spain, COSCO has a 51% stake in and managerial control of the largest terminals in Valencia and Bilbao. It also has minority stakes in other terminals in Antwerp, Las Palmas and Rotterdam.

The Greek port of Piraeus is controlled by ChinaImage: Imago Images/B. Lindenthaler

Van der Putten didn't look at the defense aspects of such concentrated Chinese investments, but he believes his findings still provide plenty of reason for concern. "The kind of influence that China is building makes it possible for China to divert trade flows from one place to another place," he told DW, adding that "that, particularly, is dangerous, that Europe is losing or risks losing control over something as important as its foreign trade."

Expert: Europe lost the plot last time

Van der Putten says there was a burst of media attention when Piraeus was taken over, a move he said was necessitated by Greece's lack of economic options under the European Union austerity program in the wake of the financial crisis and which he suggests might now be causing regret. "[Greece] had to find a buyer, and for Brussels, any buyer was fine," he recalls. "So if China was the only potential buyer, then a Chinese buyer was fine. So looking at it now, I would say that this was a mistake."

Van der Putten says western European countries who believed then they would not be vulnerable to Chinese influence should be thinking again now. "I hope that there will be some sort of a common European solution to this and the weak countries won't just be left to find a solution for themselves," he said.

Brussels should know better now 

The EU has adopted new measures since then, which came into effect a year ago. They are part of the so-called foreign investment screening framework, aimed at safeguarding the bloc's strategic interests. By October, all member states were due to have a process in place under which they notify each other and the European Commission if an investment offer from outside the EU could be questionable. In light of Chinese and Russian influence operations during the pandemic, the commission has urged governments to speed that up.

Erik Brattberg, director of the Europe Program at the Carnegie Endowment for International Peace, believes Beijing won't be granted such an open market for procuring European infrastructure again. "This time around I think there's more attention and there's more scrutiny of China's activities, and there are greater protection measures put into place," he said. "But we have yet to see how successful and effective those measures will be should China seek to take advantage of an economic crisis in Europe in order to step in and try to acquire additional assets and types of critical infrastructures."

In Europe's favor, however, there are signs the coronavirus crisis may have slimmed even China's all-powerful pocketbook. 

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