Swerving away from the Silk Road… The Italian government intends to walk back from China’s Belt and Road Initiative. Prime Minister reportedly said so to United States House Speaker Kevin McCarthy when he visited Rome (along with a bipartisan delegation of MPs) last week. This was revealed by Bloomberg, which cited people present at the meeting and explained that the PM’s diplomatic advisers are still considering the details and timing of the decision as they fear an economic backlash from China.
- The MoU (signed in 2019) is set to auto-renew in 2024 unless either Rome or Beijing declare they’re out by the end of 2023.
- Opting not to renew it would strengthen Italy’s drive to rebalance ties with China – towards which it has a trade deficit despite being the only G-7 member to enter the BRI – and burnish its Atlanticist credentials.
… while also fending off a replacement? As Decode39 reported, some within the Italian Ministry of Foreign Affairs are considering an alternative commercial agreement to soften the inevitable Chinese retaliation. The Prime Minister’s offices rejected that hypothesis – which would have arguably left everyone unhappy.
- Ditching the BRI would also allow Italy to stand out within the EU, where the two other biggest economies – namely France and Germany – have recently reverted to geopolitical ambiguity to curry Beijing’s favour and push their own economic interest.
Timing matters. The attention of European and US allies on the matter is growing ahead of the G-7 meeting in Hiroshima, which takes place in less than two weeks. Recently, the issue has surfaced in several international news outlets – including Reuters, Bloomberg, Politico, Euractiv, CNBC and SCMP – reflecting Washington’s hope that Rome might ditch the BRI.
- “The Italian decision is also a test for G-7 cohesion toward China,” said Alexander Alden, Non-Resident Senior Fellow at the Atlantic Council, to our sister website. “One of the themes of the summit is the Silk Road alternative, and in this sense, it will be important to assess cohesion and solidarity toward Italy, which may decide to do the right thing by exiting the Silk Road project.”
Watching out for key Italian companies. The BRI choice, Bloomberg further writes, is linked to PM Meloni’s position on de-risking Chinese investment in Italy – and especially the upcoming decision on whether or not to exercise special powers to limit Sinochem’s 37% stake in leading tyre maker Pirelli (a decision is expected by the end of May).
- Another dossier could be opened: that of CDP Reti, which manages equity investments in key Italian gas and energy grid companies – Snam, Italgas, and Terna – and where Chinese state-owned giant State Grid Corporation of China owns a 35% stake.