The Croatian Restructuring and Sale Centre sold almost 21 per cent of shares of the Port of Rijeka. They were bought by the Polish company OZ Logistic for EUR15m.
OZ Logistic became the largest stockholder in the Port of Rijeka, as they had already have 20,81 per cent of shares in hand. The stock prices went up instantly after the announcement of the Polish interest. The other public stock owners include the Croatian State, Croatian Health Insurance Fund and the Croatian Pension Insurance Institute. According to the Croatian jurisprudence on joint stock companies, by taking over the control threshold, the Polish firm had to give the binding offer to take over the remaining stocks.
Advantages and disadvantages
Obviously, the changes happening on a global level indicate an increasing reaffirmation of the Mediterranean and the Adriatic in terms of maritime traffic, which for the Port of Rijeka means the additional strengthening of its market position, especially regarding maritime trade between Europe and the Far East.
The Port of Rijeka is the main Croatian naval port, situated in the northern part of the Adriatic coast. Together with Trieste (the two towns are often known as twin-cities), it was the most important harbor of the Austro-Hungarian Empire and was under the direct rule from Budapest. In the former Yugoslavia, Rijeka was the main maritime port with huge capitalization and naval connections in the whole world through the state company Jadrolinija. Today, it is the biggest Croatian port with 11,2 million tons of sold cargo in 2016 and 214,348 TEU. The cargo is mostly oil, general cargo, and bulk cargo (timber, frozen cargo, crops, cattle, liquid, containers). It has a strong competition in Slovenian Koper and Italian Trieste and Venice, but for its geographical position, Rijeka is much more suitable for transport to the Central and Southeast Europe (CSE).
Besides the technical difficulties regarding the sea gauge and dislocation of port units (two units for general cargo Rijeka and Sušak; one unit for the bulk cargo in Bakar; and partially some units in the oil terminal on the island of Krk overlooking the Rijeka harbour), the port has several other important disadvantages. It lacks a solid railway from Rijeka to the Hungarian border, as the railroad is tied to the serpentines leading to the Croatian highlands (Gorski Kotar). The serpentines are steep and short, meaning the train cannot run fast and there is a limited number of cargo waggons. A railway junction in the highlands needs a change of locomotive and all of these makes a dire need to build a new railway. The port requires also new harbour terminals in Rijeka and Krk, a railway on the Krk bridge, and additional reconstructions in other terminals. The key component of the whole reconstruction is cargo, without which every project is not profitable and indeed futile. Without the profit, is it hard for European Commission to step in and co-finance various projects. Only the increase of cargo can financially justify the recapitalization using the EU funds.
Challenges for OT Logistic
In 2015, the recapitalization of the Port was made with the public offer for new stockholders. For some time, the insurance funds were keen to join the recapitalization cycles, but somewhat a surprise came when the Polish company OT Logistics announced its intention to become the owner of some 17-18 per cent of shares. The company has more than 400 ships, and with the OT Logistics Group provides all the services connected to the river and sea transport, loading and unloading of goods, storage and real estate rental in the port. The group consists of 24 interconnected companies that work together for more than 70 years and make some 80 per cent of the inner river and maritime transport in Poland.
The Croatian government was pleased with the offer, as they have pointed to the potentials of the transport corridor Baltic-Adriatic. The ministry of transport accentuated the possibilities of strategic partnership between Croatian Railway Cargo (HŽ Cargo) and the Polish Railway Cargo (PKP Cargo). Still, the specific position of the Port is characterized by an absence of quality flat areas by the shore, which makes the development of port activities difficult and expensive. Besides the depth of the sea, it would be of utmost importance to base the gateway on modern transport technologies and the most up-to-date technological solutions in planning the development of Rijeka and its wider surrounding area regarding traffic and traffic terminals. Considerably weak railway and road connections and insufficient poor-quality facilities on the mainland obstruct the development of the port. The system of the Port of Rijeka is also inappropriate connected with road and railway connections.
Where is China?
Polish partner took the place of Chinese companies. Eight years ago, China was intended to be the biggest economic partner of Croatia, after Chinese president Hu Jintao visited Zagreb in June 2009. His high-profile visit was prepared for months, but in the end, Hu left Croatia without any serious deal. China wants to open the transport corridor for the Chinese goods through Port of Rijeka. The Chinese government offered USD10bn to develop the port, build the railway, finance the opening of several industrial zones, and strengthen cooperation in tourism and medicine. They expected 40 per cent more traffic and 25 per cent more revenues for the Port. The Chinese businessmen and state companies visited several times the port and started with smaller investments in the port cranes. Unexpectedly, the Croatian government stopped the initiative and turned down the offer described in the Croatian media as the deal of the century.
Apparently, in 2009 Croatia was under lots of pressure from the European Union. The economic crisis and the prospects of the blockade in the accession negotiations were prevalent. Then Prime Minister Ivo Sanader abruptly withdrew from the talks with Chinese and some politicians started to talk about the pressures from Brussels to stop the deal. The idea was that EU will contribute to the port development. Up to this day, it did not. Indeed, the European institutions and some members states such as Germany don’t like Chinese investments and funds used for the better infrastructure in the southern European countries. Michael Christiades, the president of the Organisation of the Black Sea Economic Cooperation (BSEC), recently confirmed that northern European countries see the Chinese investments as a threat to their already viable infrastructure for large transportation traffic, especially in ports such as Rotterdam and Hamburg. Croatia might have succumbed to the pressures from these countries.
Today, Croatia is part of the EU and perceives the investments in a different way. Chinese did go to the neighboring countries, but it does not mean they have lost the interest in connecting the Northern Adriatic harbors with the Danube and Central Europe. The Three Seas Initiative is in this regard paramount, as the Chinese look favorably on the cooperation of Central European countries, and especially the Polish-Croatian transport corridor axis. The Port of Rijeka is in that plan strategically one of the most important points.
Vedran Obućina is an analyst and a journalist specializing in the Croatian and Middle East domestic and foreign affairs. He is the Secretary of the Society for Mediterranean Studies at the University of Rijeka and a Foreign Affairs Analyst at The Atlantic Post.