Enab Baladi – Jana al-Issa
The investment contract of the French company “CMA CGM” for the container terminal at the port of Latakia will end in October this year, following the expiry of the initial ten-year contract and its renewal in 2020 for another five years, without Syrian regime media or institutions addressing the fate of this contract so far.
When the contract ended for the first time (in 2019), the Syrian regime government expressed a clear desire to renew it, amid unconfirmed news at the time about Russian-Iranian ambitions to manage the port. Nevertheless, there were serious efforts that succeeded in extending the contract for another five years.
In the absence of official information from the regime government in this regard, Enab Baladi attempts in this report to analyze the government’s position on this investment, and the reasons that may drive it to renew or terminate the investment contract.
The Port of Latakia is one of the oldest Syrian ports. In 1950, the Syrian government established the Latakia Port Company, which is a joint private-public sector, according to legislative decree No. 38 concerning the establishment and investment of a maritime port in the city of Latakia and its affiliated facilities.
The company became affiliated with the Ministry of Transport starting in 1974, and then turned into a public sector company under Law No. 17 of 1982.
Fifteen years ago
In February 2009, the General Company for Latakia Port signed a contract with both the French “CMA CGM” company, “Terminal Link”, and “Syria Holding”, to manage the container terminal at Latakia port for a duration of ten years, renewable for five years upon mutual agreement.
The three investing companies later established the Latakia International Container Terminal (LICT) as a limited liability Syrian company, to manage and operate the container terminal, starting its operation on October 1, 2009.
According to the contract, the investment value from the operating party amounts to $45.9 million, including $6.2 million for maintenance and rehabilitation of the terminal infrastructure, and $6.2 million for purchasing equipment that will belong to the port company after the contract ends.
The contract obliged the terminal to benefit from the excess labor at the port by employing 160 workers at the terminal and 550 workers from the labor market, with the terminal’s revenues distributed at a rate of 61.05% for the port, and 38.95% for the operating company, and to ensure that the operational level of the terminal is up to global standards, especially regarding electronic control of the entire production process, which regulates the revenues, thus preventing the loss of any amounts due to the port, in addition to providing machinery at the terminal’s expense, mainly container handlers and forklifts for handling goods.
The terminal area is 33.38 hectares in the first phase, featuring four docks and twelve refrigerated container inlets, as well as four berth cranes, five mobile cranes, 26 container handlers, 17 “staffas”, 55 forklifts, and 33 trailers.
Full conviction for renewal
Despite not officially discussing the renewal of the contract or not this month, the state-run newspaper Tishreen indicated in a report in October 2023, what it called a “complete conviction” within the Ministry of Transport in the regime government about the necessity of renewing the contract signed between the General Company for Latakia Port and the French company.
According to the report, this conviction arose due to the terminal’s commitment to continue its operations at the port despite the country’s conditions over the past years, and it did not withdraw from its work as others did, especially the Philippine container terminal at the port of Tartus in 2013.
The report indicated that in this context, the ministry has prepared to consult and contract anew, as it issued a decision mid-last year to form a team of experts headed by the chair of the administrative committee of the port company, including the director-general of the company, the director of marine transport affairs in the ministry, the director of fisheries and licenses at the general ports directorate, the director of planning and international cooperation in the company, and the head of the supervision department in the company.
The team’s aim is to negotiate with the French company to renew the contract, in addition to discussing with them the project of continuing to expand the port to develop it, and to make the draft suitable for the sizes of global ships and compete with neighboring ports in terms of the possibility of receiving large vessels and creating multiple docks.
Despite a year and a half having passed since this decision, the Transport Ministry has not yet announced, at the time of writing this report, the outcomes of these consultations regarding the acceptance of the French company to renew the contract.
No indicators of failed negotiations
The delay in determining the fate of the international Latakia Container Terminal Company’s contract does not necessarily indicate the failure of the ongoing negotiations, given the precedent, according to what the economic journalist Iyad al-Jaafari said to Enab Baladi.
In October 2019, when the contract expired, it took several months until the summer of 2020 to finalize its extension for another five years, which ends this October. Therefore, the delay in announcing the outcome of the consultations regarding the acceptance of the French company to renew the contract does not necessarily mean failed negotiations, but rather signifies complexities that make negotiations challenging.
It is difficult to ascertain the nature of these complexities, according to al-Jaafari, as in the previous instance, the complexities stemmed from the Russian-Iranian struggle over the port. Additionally, we do not know (as per available media reports) the position of the French company itself regarding the idea of extending the contract, given that its work at Latakia port has been complicated by Iranian influence and close associates of the regime, especially from the Assad family, who have succeeded in providing smuggling outlets through the port, along with increasing uncertainty regarding the security situation in Syria amid the current Israeli escalation.
Iyad al-Jaafari believes that a quick resolution regarding the renewal of the contract is unlikely and that what occurred in October 2019 may be repeated, where the French company continues its work despite the expiration of its contract until negotiations are resolved.
For his part, Karam Shaar, the director of the Syrian program at the Observatory of Political and Economic Networks and a doctor in economics, has predicted that the contract will be renewed with the same company without any changes, according to the implicit messages sent by the Transport Ministry in the regime last year, expressing its gratitude for the French company’s investment in the port.
Russian-Iranian conflict
When the contract ended for the first time in 2019, the government also did not announce any information about its desire to renew the contract with the French company or not. However, sources in the Ministry of Transport at the time indicated that the ministry rejected contract renewal due to a Syrian decision to appoint an Iranian company to replace the French company, which did not happen, as a late extension agreement was signed for another five years, ending this month.
The delayed renewal of the contract then until the summer of 2020 was considered by specialized analyses to stem from an Iranian desire to obtain the investment against a Russian rejection, while the final decision favored Russian interests over Iranian wishes.
The delay between the expiry date of the contract and the decision for its five-year extension had two reasons, according to economic journalist Iyad al-Jaafari, in a report published by the “al-Modon” website in January 2021; one was the resolution of the Iranian-Russian struggle within the Syrian regime’s corridors in favor of the Russians, as it did not meet Iran’s openly stated desire in the spring of 2019 to invest in Latakia port.
The second reason for the extension of the contract was the refusal of the owners of the company to give up their right to invoke the principle of “force majeure” to justify their continued investment in the container terminal.
The conflicting interests between Russian and Iranian parties were reconciled in favor of Moscow, which also avoided capturing the investment at Latakia port, perhaps to avoid provoking Iran after it secured investment at Tartus port, with a 49-year contract. However, Moscow succeeded in preventing Iran from accessing this investment, according to al-Jaafari.
Iran gains revenues
Karam Shaar does not agree with the narrative of a Russian-Iranian competition over Latakia port, as he stated in an interview with Enab Baladi.
He justified his view by saying that Russia, through the company “Stroy Trans Gaz,” secured a contract that ensures its continued presence at Tartus port.
Meanwhile, Iran’s role in the port issue is highlighted through its government currently receiving a portion of the revenues from Latakia port, according to information obtained by Karam Shaar, without providing further details regarding the reason for this agreement or what it is in exchange for, adding that this will be explained in a forthcoming study regarding the economic roles of Iran in Syria.