Beirut, Lebanon (PortSEurope) April 12, 2021 – An over-ambitious $5-7 billion plan with up to 20 years construction span of two German companies wants to move the explosion-destroyed Port of Beirut to land on the east side of Beirut River, where currently there is a landfill. France’s CMA CGM, whose founders (the French-Lebanese Saade family) is from Lebanon, has presented a much more realistic $400-600
million plan to rebuild only the port in its current place within three years. It envisions the reconstruction of damaged docks and warehouses, along with port expansion and digitalisation (more details in PortSEurope story CMA CGM interested in the reconstruction of Beirut port). The German proposal, presented by Hamburg Port Consulting (HPC) and Colliers Germany, envisions the main port access to be moved from the city center, devastated by the explosion on August 4, 2020, to the town’s industrial area. The giant grain silos that shielded the western part of the city by absorbing much of the shock of the explosion are to be replaced by smaller ones (more details in PortSEurope story The Project for a European revival of the Beirut Port and the surrounding area). But what if the two projects are combined? HPC and Colliers are ideally positioned to focus on the urban development while CMA CGM has the perfect expertise to create a new port and especially its container terminal. Both sides will have the impressive backing of the German and French governments, supported with additional authority and money from the European Union. The detonation (one of the world’s largest ever non-nuclear explosions) 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, fuelled outrage over government corruption, incompetence, negligence, and inaction. According to the German plan, the west side of the present-day port would be redeveloped into residential and business buildings, public and private beach areas and a large public park. It is expected that the new development will generate billions in profits that can be invested in rebuilding the explosion-damaged parts of the city. German business consultancy Roland Berger compiled the proposal for the port’s reconstruction. Chinese state-controlled companies and Dubai’s DP World (it operates globally ports and terminals, industrial parks, logistics and economic zones, maritime services and marinas) are also seen as being interested in the rebuilding of the port. Their plans also do not include the surrounding areas. The private German initiative is for the creation of a world class, state-of-the-art port that would be highly automated, cost-efficient and will respond to regional trade growth. It is the first comprehensive rebuilding plan and has the support of Berlin’s government. The plan envisions financing management by an independent trust company with international supervision that would be key to gaining the confidence of potential investors. The French government is not part of CMA CGM’s reconstruction plan, but French companies and French financial institutions had shown interest. The CMA CGM project sees role for the Lebanese state through a public-private partnership (PPP). CMA CGM is the leading shipping operator at Beirut port, accounting for 60% of the cargo volumes, and is a candidate, most likely in a partnership with MSC (Mediterranean Shipping Company), for the concession to run the container terminal. The tender for the management of the container terminal is expected to be restarted by May. MSC, owned by the Aponte family, is a shipping and logistics company, present in 155 countries. It has a fleet of 570 vessels and more than 70,000 staff. The reaction towards the German project was sceptical mostly based on the inability of the Lebanon’s leaders to providing the most basic conditions for foreign investment. Any plan for rebuilding the port and the devastated city is impossible without a new government to transform the country and launch long-stalled reforms. Lebanon defaulted on its debt in 2020, sending its currency crashing. Its economy shrank by 25% last year. At the same time the standoff over the make-up of a new government has intensified in recent months. The rebuilding of the port of Beirut and the surrounding area is expected to be also on the agenda of the U.S. Under Secretary for Political Affairs David Hale, who is expected in Beirut this week for talks on the maritime border between Lebanon and Israel. Lebanon is currently facing the perfect storm of political instability, deep economic crisis (since 2019, the Lebanese pound has lost more than 85% of its value against the U.S. dollar on the black market), coronavirus pandemic, meddling in its internal affairs by Iran and Syria leading to a situation worse than during the country’s 15-year civil war that ended over 30 years ago. More than 50% of Lebanese today are living in poverty. Unemployment is 40%. The reconstruction of the port and the damaged part of Beirut is estimated to cost between €4.5 and €12 billion ($5-15 billion). France is considered the front runner for the project – a natural choice due to its historical and cultural ties to Lebanon. 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 United Arab Emirates (UAE). China is the other possible suitor for the reconstruction of the strategic port but accepting a Chinese investor for the port would alienate the U.S., which is already displeased by the China’s involvement in nearby Israeli port of Haifa. Turkey declared its interest in the Port of Beirut reconstruction only four days after the explosion last summer. It does not control any ports in the area apart from its own in Turkey, 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 Erdogan. But analysts view Erdogan’s empire building ambitions as one more incentive for France to take over the port. It is clear that the main foreign contenders to rebuild the geopolitically strategic facility in the Eastern Mediterranean will not invest billions of 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. 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. 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. 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 Lebanese port of Tripoli that Beijing has already rehabilitated for its own use. A Chinese engineering company has been working in Tripoli to create a berth to accommodate Chinese made cranes capable of moving about 700 containers per day. Only days after the explosion, Kuwait pledged to rebuild Beirut’s port grain silo, Lebanon’s largest, which was originally financed by a Kuwaiti development fund in 1969, but it is unlikely that Kuwait will invest alone in the new port project. Russia is also seen as a contender and potential investor in the rebuilding of the port, which would also be comfortable in working with Hezbollah, but it lacks money for such an investment. United States might also be interested to invest in the rebuilding of the Beirut port. This is going to help them counter the Iranian and Syrian influence in the region. It is also going to prevent China from establishing a near monopoly on the key ports in the Mediterranean. Last but nor least, this is seen as a pre-emptive move against possible Russian and Turkish influence in a strategically important region. The European Investment Bank (EIB) signals that it will be ready to allocate up to €3 billion ($3.5 billion) for the Beirut part reconstruction. Reuters reported that such a project could create up to 50,000 jobs and require 100 hectares of land. 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. 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 because of the explosion and is expected to be held by May. 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). 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. 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. The state-owned Shanghai International Port Group (SIPG) is set to operate the Bay terminal at Haifa port for 25 years. Ita is also interested in a further concession at the port. The story behind this huge amount of explosive material rotting in a poorly secured and maintained warehouse in the port of Beirut that detonated in August 2020 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. CMA-CGM stands for Compagnie Maritime d’Affrètement and Compagnie Générale Maritime. (Further PortSEurope reading: Germany enters the fray for the reconstruction of the Port of Beirut. What about France, China, Turkey, United States, Russia, UAE, Kuwait?) Copyright (C) PortSEurope. All Rights Reserved. 2021.