Germany’s Scholz overruled Habeck to approve China port deal

BERLIN — Lawmakers are blasting German Chancellor Olaf Scholz for approving a controversial Chinese investment in a Hamburg port terminal despite objections from Vice Chancellor Robert Habeck and other ministries.

A crucial mistake key departments made during the investment screening process allowed Scholz to outmaneuver his critics.

Many countries are looking to how Germany, the EU’s largest economy, deals with China amid growing calls to “de-risk” their economies by reducing dependencies on Beijing.

But Berlin is sending a mixed message.

Scholz warned earlier this week that China is increasingly becoming a competitor and rival for the EU. At the same time, he is seeking closer cooperation with Beijing by hosting a joint government summit in Berlin on June 20.

Against this backdrop, Scholz’s spokesperson Steffen Hebestreit announced late Wednesday that Berlin is “sticking” to a deal allowing Chinese state-owned shipping company Cosco to buy a 24.99 percent stake in Hamburg’s Tollerort container terminal. This confirmed a government decision from last October, which was put in doubt after security authorities declared the terminal “an operator of critical infrastructure” — meaning the acquisition could have faced heightened restrictions.

In deciding to brush away those concerns and proceed with the deal from last year, Scholz, a former Hamburg mayor, overruled Habeck, who leads the economy ministry that is in charge of reviewing investments. Habeck opposed Scholz’s plan and pushed for a reduction of Cosco’s shares in the terminal. Other ministries like foreign affairs and finance also raised concerns.

“There were diverging assessments in the evaluation of the acquisition,” said a spokesperson for Habeck.

Ultimately, however, Scholz was able to ram through the sale because any change to the October preliminary approval required unanimous cabinet backing, according to an economy ministry official who asked not to be identified due to the sensitivity of the matter.

‘Unbelievable incompetence’

Scholz’s action triggered turmoil within the ruling coalition of the chancellor’s Social Democrats, Habeck’s Greens and the Free Democratic Party (FDP).

“The Chinese participation in the Tollerort terminal has come about in a process that is highly critical,” said FDP lawmaker Michael Kruse.

Green lawmaker Felix Banaszak told Handelsblatt that Scholz was promoting “a foreign economic policy that has learned nothing from the fatal mistakes in dealing with Russia.”

Further criticism came from Roderich Kiesewetter from the center-right CDU opposition party, the deputy head of the German parliament’s control body for intelligence services.

“It is a decision against the assessment of the intelligence services and relevant ministries, against Europe’s China strategy and against allies who cite China’s increasingly aggressive behavior as the greatest threat,” said Kiesewetter, calling Scholz’s decision a “solo effort.”

Critics of the China deal are furious because under normal circumstances they would have had the upper hand in the process, but there was a serious blunder during last year’s screening of the Cosco investment.

Although security authorities now say the Tollerort terminal is “critical infrastructure,” that actually applied from a year ago when the government adopted a new regulation. However, Hamburg port logistics company HHLA only reported that it qualified as critical infrastructure in January.

Both the Federal Office for Information Security (BSI) as well as the interior and the economy ministries were seemingly asleep at the wheel as they failed to check the information provided by the port authority and realize the mistake.

Had Habeck and others known about the security assessment ahead of the October cabinet approval, it would have justified a push for a significant reduction of Cosco’s shares in the terminal, potentially below a 10 percent government threshold to intervene in cases of critical infrastructure.

“That’s is an unbelievable incompetence in the handling of this case,” CDU foreign policy lawmaker Norbert Röttgen told POLITICO. “A lot suggests that several ministries involved have made clear mistakes.”

In an emailed statement, the interior ministry argued that its officials as well as the subordinate BSI had made “accurate findings,” but declined to go more into detail as “business secrets of the companies concerned are affected.”

Röttgen also complained that Habeck should not have given up when Scholz insisted that the cabinet decision could not be changed without his approval.

The Cosco deal “was an illegal administrative act because it was based on an incorrect classification of the port terminal,” he said. “And [Habeck] is letting himself be taken for a ride if he accepts that some kind of quorum is required to annul an unlawful administrative act.”