Friday, June 9, 2023

Italy to hold talks with China about exiting Belt and Road Initiative

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Italy plans to hold talks with China about a potential exit from Beijing’s flagship infrastructure investment programme, while seeking to maintain friendly relations and robust commercial ties.

Rome was firmly rebuked by Washington and Brussels when it joined China’s ambitious Belt and Road Initiative in 2019, the only G7 country to do so. Prime Minister Giorgia Meloni, during last year’s election campaign, also publicly called the decision “a big mistake”.

Meloni said on Wednesday that she had not yet decided whether to terminate Italy’s participation in the signature foreign policy programme of China’s president Xi Jinping. “The debate is open,” Meloni said in Prague.

But Italian officials say Meloni’s government would ideally like to find a way to extricate itself from the BRI — without provoking Beijing’s wrath, or being subjected to punishing retaliation.

“We want to maintain good relations with them and work to avoid problems escalating,” said one official, adding that Rome did not wish to “antagonise” China.

For Meloni, the clock is ticking. Italy’s four-year agreement to participate in the BRI contains an unusual provision for automatic renewal when it expires in March 2024 unless Rome formally notifies Beijing of its intent to withdraw three months beforehand.

That gives Meloni — an arch-conservative who is eager to prove her government’s credentials as a trustworthy ally to the US and EU — until December to resolve one of her biggest foreign policy tests, and minimise its diplomatic and economic fallout.

“Given the state of relations between the US and China, we cannot remain an ally of the US and at the same time remain in the BRI,” said Stefano Stefanini, Italy’s former ambassador to Nato. “We have to try to negotiate a peaceful — or [the] least damaging possible — exit with the Chinese.”

But officials said that US pressure on Italy over the matter had eased recently, as Meloni proved staunch in her support of Ukraine. They also say that open channels of communication with Beijing could be useful in pressing China to push for an end to the war in Ukraine.

Italy’s business community, already reeling from sanctions on Russia, is fretting, as it had turned its gaze towards post-pandemic China: Italian exports to China jumped 92.5 per cent in the first quarter of 2023 from a year earlier, mainly driven by a short-term surge of pharmaceutical exports.

“A possible withdrawal would lead to a cooling of bilateral relations at a historic moment in which companies and professionals are experiencing a frenzy and a desire to return to the Chinese market,” said Mario Boselli, president of the Italy China Council Foundation, a business association.

China’s foreign ministry said it believed that Rome “should continue to tap the potential for Belt and Road co-operation . . . and let the fruits of developing the China-Italy relationship benefit the two countries”.

Shi Yinhong, professor of international relations at Renmin university in Beijing, said Rome’s current conundrum reflected “the opportunist approaches” of past Italian governments towards Beijing.

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Rome’s entry into the BRI in 2019 was driven by former premier Giuseppe Conte, of the populist Five Star Movement, as Italy was suffering the effects of a debt crisis. By that time, Italy had already absorbed a series of large Chinese investments into key strategic businesses, including energy and telecommunications.

Conte’s successor, former prime minister Mario Draghi, was more wary and used so-called golden powers to block several Chinese acquisitions, including an Italian microchip company and vehicle manufacturer Iveco.

Meloni’s government, too, is using that authority to scrutinise the impact of Sinochem, the Chinese state-owned chemical giant, owning a 37 per cent stake in Pirelli, a process that some say could lead to limits on sharing sensitive technologies with the Chinese company. Pirelli declined to comment.

Prior to becoming prime minister, Meloni criticised Beijing’s human rights record and wrote that it was “a serious mistake” to treat China as “an equal partner, since it does not play by following the same rules that we follow”. She has also publicly expressed support for Taiwan, the self-governing island that Beijing considers part of its territory.

“We don’t have any Chinese weak point, as former governments did,” said Lucio Malan, leader of Meloni’s Brothers of Italy parliamentary group.

Meloni’s wariness towards Beijing is shared by much of Italy’s political establishment. Public attitudes towards China also deteriorated, particularly during the pandemic.

“The populist government thought that China was the solution to Italy’s historical problems — public debt and the difficulty in making investments,” said senator Enrico Borghi, a member of the centrist opposition party Italia Viva. “In these five years, the awareness of the risks of the BRI has strongly increased,” Borghi said, noting that almost all parties have “abandoned the idea that China could solve Italian problems”.

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For all its heavy political symbolism, Italy’s participation in the BRI brought little progress on the core offer of transport infrastructure. A Chinese state company lost an open tender, worth around €1bn, for a breakwater dam near the Port of Genoa.

Given the BRI’s limited economic impact, some analysts believe that Meloni’s best course would be to maintain the status quo and the deal be renewed automatically.

“Halting a vague collaboration would make more noise than letting it be renewed automatically”, said Beatrice Gallelli, China researcher at the Istituto Affari Internazionali, a think-tank in Rome.

But others say that Meloni needs to send a clear signal in a world of heightened US-China tensions. “Politics is choosing,” said Stefanini. “In Washington, China is as much, or a bigger, priority than Ukraine. She cannot have China and the US at the same time, as difficult as it is.”



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