Nations sometimes lease pieces of their territory to one another, and the resulting servitude typically benefits both parties: One gets the use of additional space while the other is compensated financially, politically, or in some other way.
Nearly every lease has been created at the behest of the country that sought to gain from the added territory, but there is no reason why such an arrangement can’t be instigated by the nation that would benefit from the compensation. Financially ailing Greece would do well to consider this as an alternative to some of the austerity measures that are provoking unrest and disruptions.
A German politician’s proposal that Greece sell an island or two was rightly dismissed. The implied transfer of sovereignty would have been problematic. Sales of territory sometimes occurred as countries took their present shape, but in the past 150 years this type of formal cession has given way to leases and similar arrangements that leave sovereignty intact.
Hong Kong, the Panama Canal, and Guantánamo Bay are all examples of this. The first two territories even reverted back to their sovereign owners enhanced, yielding ongoing financial and economic benefits. Guantánamo showed that a leased territory can be misused like any other, but it doesn’t negate the potential value of such an arrangement.
Ukraine recently let Russia renew its lease at the port of Sevastopol for another 25 years in exchange for a price break on Russian natural gas. Both countries were desperate for what the other offered — Russia needed a site for its Black Sea fleet, and Ukraine’s floundering economy will benefit from gas discounts totaling around €30 billion. This equals a sizable chunk of the €110 billion Greek rescue plan agreed by the European Union and the International Monetary Fund, and illustrates the magnitude of sums that a deal like this can channel to the recipient country.
The rights in a lease can be narrow or broad, the compensation can take a variety of forms, and the time period can reflect the nature of the commitment. Therein lies the concept’s relevance for a country like Greece. Offering limited rights on some of its territorial assets while retaining sovereignty over them can be an optimal way to finance a reduction of state debt.
There are plenty of countries that wouldn’t mind securing temporary rights in parts of Greece or in other troubled E.U. nations like Portugal or Spain. Even restricted rights can be attractive, like the ability to exploit a single resource or engage in some other lucrative activity.
Greece itself was the laboratory that showed this can work, back in 1897. It had declared bankruptcy four years earlier, curtailing payments on foreign debts. After long, tough negotiations, an agreement was reached that gave the creditor nations the ability to pay themselves off with future funds generated on Greek territory. They got the right to collect import duties at the port of Piraeus, to keep revenues from state monopolies that sold oil, salt and matches, and to collect taxes on tobacco until the debts were paid off. Greece retained complete policymaking authority in the areas concerned, notably trade.
The process was tightly controlled. A commission created by the creditors would receive the collected funds and invest them in financial instruments abroad. The proceeds replaced Greece’s international debt service payments. Any excess funds generated by the investments would go to Greece, to service its domestic debts.
The plan was foresighted and discouraged cheating. To ride out future economic slumps, it allowed the foreign creditors to collect customs duties from other Greek ports if the intake at Piraeus, the main port, diminished. This also quashed any thought of diverting incoming ships to alternate ports.
The parallels between Greece’s situation in 1897 and today are striking, even with the many political and financial changes in the intervening years. This suggests the idea of a financial servitude on Greek territory can still have relevance if it is revived, studied and adapted to the current crisis.
Michael J. Strauss, a teacher of geopolitics at the Centre d’Etudes Diplomatiques et Stratégiques in Paris and the author of The Leasing of Guantánamo Bay.