Italy Embraces Belt and Road Initiative

Italy Embraces Belt and Road Initiative

On March 23, Italy formally endorsed China’s landmark Belt and Road Initiative (BRI). The new arrangement risks riling fellow EU members, the United States and the rest of the G7. It could also see a seismic shift in China’s Europe strategy. Xi Jinping’s increasingly ubiquitous reinvigoration of the Silk Road will result in further involvement in European politics, business and defence for years to come, with wide-ranging repercussions. Italy’s decision places itself in an invidious position and will meet disapproval from traditional allies.

China’s BRI Initiative

China’s Belt and Road Initiative, launched in 2013, is the world’s largest infrastructure project. Through a plethora of projects from ports in Pakistan to airports in Sri Lanka, China claims the boosts trade and stimulates economic growth across Asia and beyond. The combined total of the projects is estimated at $1.3 trillion and involves nearly eighty nations. It seeks to establish this infrastructure to increase connectedness between China, Europe, the Middle East and Asia. This ‘New Silk Road’ remains controversial, criticised by opponents as a means of extending Chinese soft power, pernicious bank loans and influence across central Asia.

On March 23, during Xi Jinping’s visit to Rome, Italy’s Prime Minister Giuseppe Conte signed a memorandum of understanding (MoU) with Xi, officially joining the global scheme of infrastructure-building.

Risk outlook

Irked European allies

In the long term, Italy’s non legally binding MoU with China risks undermining relations with the European Union. It becomes the first G7 state to endorse the BRI, raising fears that China could play Italy off against other members. Antagonism between Rome and Brussels is already at unprecedented levels. The arrival of a populist coalition of the Five Star Movement and the League, followed by the wrangling over Italy’s budget and compliance with the EU’s Excessive Deficit Procedure, make Italy a truculent partner on the European stage. China is aware of this and seeks to take advantage. This is significant because the BRI is not merely a political project, but could see Chinese presence in assets of strategic importance, such as potential acquisitions of the Italian ports of Trieste and Genoa. Hence the EU have branded China as a “systematic rival” due to its controversial industrial trade policy and predatory acquisition of intellectual property from European companies. Italy’s purported refusal to consult EU members or G7 allies has caused particular irritation.

American unease

Courting Beijing drives a wedge between Italy and the United States, exacerbating tensions caused by the protracted trade war. Unsurprisingly, the USA offered strong opposition to Italy’s move, with the National Security Council claiming that it “lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people.” China’s looming involvement in Europe could serve to undermine American interests within Italy. As a result America will expedite assistance and loans to the stagnant Italian economy, as Washington seeks to distract Rome from China’s exploitative loan system.

Another fear of the USA is the long-term threat to Europe’s security considerations. Huawei is already under the microscope for furthering Chinese defence and intelligence interests; America fears that the BRI could be a mechanism for utilising telecoms contracts, intelligence snooping and cyber hacking activities against Western European governments and companies. Although Italy has purposely excluded Chinese investment in telecommunications from the MoU, preventing it to become involved in 5G construction projects.

Growing concerns at home

The August 2018 Genoa Bridge Collapse painted a dire picture for the state of Italian infrastructure. One would assume Italians are receptive to receiving extra outside funding for new projects. However this is not the case. Orientating towards China has proved contentious in domestic Italian politics. Many are suspicious China is simply buying Italy out. It pits deputy prime ministers Luigi Di Maio and Matteo Salvini against one another. Salvini retains an Atlanticist outlook, keen to protect traditional Italian markets. Di Maio holds a juxtaposed, mercantilist view. He believes Italy’s economy, as one of Europe’s biggest manufacturing exporters, offers substantial new trade opportunities. Italian luxury fashion goods is one industry in extremely high demand amongst Chinese consumers. This issue could offer another means of fragmentation for the coalition. Pollsters fear 5SM will struggle in May’s European elections after disastrous regional ballot results, amid concerns of an early election in Italy. Meanwhile, China’s policy of debt-trap diplomacy through the Asian Infrastructure Investment Bank is already widely recognis|ed. The struggles of Sri Lanka, the Maldives and Malaysia to repay loans are notable examples. Italy’s lackluster economy, saddled with a debt to GDP ratio of 130% risks falling foul to the same ploy.

Categories: Europe, Politics

About Author

David Grant

David is a political risk analyst with regional specialisation in Europe. His interests include European security, Brexit and European business risk. Previously he has worked for a start-up security consultancy and at the European Union's Representation to the United Kingdom. He holds a BA in International History & Politics from the University of Leeds and an MSc in Defence, Development & Diplomacy from Durham University.