Italy’s drive to join China’s Belt and Road Initiative hits potholes

Xi Jinping is due to sign a preliminary accord during his visit to Rome this week, but analysts and critics say the Italian government has not weighed the geopolitical risks of such a move, as cracks begin to appear within the ruling coaltion over the proposed links

By Crispian Balmer  /  Reuters, ROME

Tue, Mar 19, 2019 - Page 9

The ancient Silk Road was a network of trading routes that stretched from China to Italy, transporting goods, skills and ideas halfway around the world.

Jump forward two millennia and Italy now wants to play a pivotal role in the new Silk Road being created by Chinese President Xi Jinping (習近平), but joining the latest incarnation is proving controversial and risky for Rome’s modern-day masters.

Italian Prime Minister Giuseppe Conte plans to sign a preliminary accord when Xi visits Rome this week, hooking Italy up to the Belt and Road Initiative (BRI) — a colossal, multibillion-dollar project designed to improve Beijing’s trade reach.

Italy’s drive to be the first G7 industrialized nation to join the ambitious venture has angered Washington and alarmed Brussels, raising fears of a sellout of sensitive technologies and the handover of critical infrastructure.

With ports that offer easy gateways into Europe’s richest markets, Italy is a promising and prestigious prize for China.

In return for its endorsement, Italy’s government hopes for a boost in exports and investment that will lift its anemic economy out of its third recession in a decade.

However, diplomatic analysts and political foes say Rome has not weighed the geopolitical risks, failed to consult with its Western partners and underestimated growing concern about China’s burgeoning global aspirations.

“I am afraid that up until now we have handled this in too amateurish a fashion, without any real coordination,” said Lucio Caracciolo, director of the influential Limes geopolitical review.

“My fear is that in the end we will lose on both counts, getting nothing substantial from China while the United States retaliates against us for having got too close to Beijing,” he said.

Italian Deputy Prime Minister Luigi Di Maio, who leads the populist 5-Star Movement, has spearheaded the pro-Beijing policy, setting up a China Task Force within the industry ministry that has the stated aimed of making Italy a “privileged partner” in BRI.

He has visited China twice in eight months and effectively sidelined the Italian Ministry of Foreign Affairs and International Cooperation on one of the most sensitive diplomatic issues of the day.

Di Maio’s task force is led by Italian Under-Secretary of State for Economic Development Michele Geraci, who lived in China for 10 years before entering government last year. Neither he, Di Maio nor Conte had any experience of international diplomacy before last year.

Geraci speaks Chinese and fervently backs closer ties with Beijing, saying Italy has fallen behind its partners.

“When I returned to Italy I found a certain inertia when it came to China,” Geraci, a former economics professor, told reporters last month. “We need to play catch-up.”

According to Eurostat, Germany exported 93.8 billion euros (US$106 billion at the current exchange rate) of goods to China last year, with Britain next on the list exporting 23.4 billion euros, France third with 20.8 billion euros and Italy fourth on 13.17 billion euros.

“There is huge potential there that other countries are already taking advantage of,” Geraci said.

However, just as Italy adopts its new position, the rest of Europe seems to be having second thoughts.

The European Commission last week branded Beijing a “systemic rival” and called on EU leaders to back its ideas to curb Chinese state-owned enterprises.

The EU has grown increasingly frustrated by what it sees as the slowness of China to open its economy and by a surge of Chinese takeovers in critical EU sectors, accusing it of distorting local markets.

Rome says such concerns should not stop it forging closer ties and points to the fact that 13 EU countries have already signed memoranda of understanding (MOUs) with China, including Hungary, Poland, Greece and Portugal.

However, the biggest EU exporters to China have not signed MOUs and those that have do not have much to show for it, said Lucrezia Poggetti, a research associate with the Mercator Institute for China Studies in Berlin.

“They have been frustrated that vaguely phrased Chinese promises for economic opportunities have largely failed to materialize,” Poggetti told reporters.

“Signing up to the BRI without taking into account geopolitical considerations and without making concrete demands, hoping that one day you will get something in return economically, is very naive,” she said.

The Belt and Road project lies at the heart of China’s foreign policy strategy and was incorporated into the Chinese Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.

The US, locked in a trade war with Beijing, worries that Xi’s initiative is designed to bolster China’s political and military influence, and could be used to spread technologies capable of spying on Western interests.

“No need for Italian government to lend legitimacy to China’s infrastructure vanity project,” a spokesman for the White House’s national security advisers said on March 9 in a rare public rebuke for one of Washington’s staunchest allies.

Refusing to back down, Italy has nonetheless tried to reassure the US, releasing a draft of the MOU to show it offers up no firm commitments and makes no reference to the sort of technology transfers feared by Washington.

Likewise eager to show that its pro-China policy is bearing fruit, the government has leaked reports that 50 agreements might be signed during Xi’s visit from tomorrow to Saturday, including deals with oil company Eni, gas infrastructure firm Snam and shipbuilder Fincantieri.

Italy also hopes to unveil projects to develop trade through its ports of Genoa, Trieste and Palermo.

Although China’s COSCO Shipping has bought control of the largest port in Greece, Italy says it offers better entry points into Europe.

“There is still much work to be done on the China deals, including what money is involved,” said a business source involved in the negotiations, who declined to be named.

A welter of lucrative contracts would represent a badly needed victory for Di Maio, who is not only battling to soothe US tempers, but is also struggling to sell the deal to his coalition partner, the far-right League.

Even though Geraci is a member of the League, the group appeared blindsided when news of an imminent deal emerged two weeks ago, with party boss, Italian Deputy Prime Minister Matteo Salvini, warning against the “colonialization” of Italy by China.

“We are reviewing it,” Salvini, who serves as joint deputy prime minister with Di Maio, said on Thursday. “Before allowing someone to invest in the ports of Trieste or Genoa, I would think about it not once but a hundred times.”

Additional reporting by Stefano Bernabei