G7 member Italy blocks Chinese Silk Road infrastructure Bonanza

Italy’s participation in Chinese President Xi Jinping’s flagship foreign policy tool, the Belt and Road Initiative, is drawing to a close, with Rome expected to pull the plug on the four-year saga by the end of 2023.

By not renewing a memorandum of understanding signed in 2019, Italian Prime Minister Giorgia Meloni will ensure no country is a member of both the Group of 7 rich countries and China’s infrastructure bonanza.

The final nail in the coffin appeared to be hammered into place last week, when Italian Defense Minister Guido Crosetto called the decision to join the initiative improvised and atrocious.

Meloni is expected to travel to Beijing in autumn to explain the decision to Xi in person after meeting US President Joe Biden in Washington last week.

The writing has been on the wall for some time. Even on the campaign trail, Meloni described the decision to join as a big mistake. Managing the fallout of the situation, however, puts the country’s first far-right leader since World War II in an unenviable position.

The decision comes as most of western Europe is trying to re-balance ties with China.

But while Brussels has left its de-risking strategy deliberately vague – partly to offer EU members diplomatic cover when disentangling themselves from parts of the Chinese supply chain – no such ambiguity is available to Meloni.

The issue for Italy right now is how to move out of the [belt and road], which is a political and not an economic tool, while maintaining or maybe strengthening the economic links with China.

That is the challenge Meloni faces, said Lorenzo Codogno, chief economist at the Italian Ministry of Economy and Finance from 2006 to 2015.

In effect, Italy faces being punished twice for joining the initiative, and without harvesting any of the economic rewards it might have hoped for.

When we signed the memorandum, we didn’t get any significant economic advantage. And now, since the overall geopolitical context is forcing us to go out, we again lose.

We first lost reputationally as far as Western countries were concerned. Now, we lose reputation in the eyes of China, said Giuliano Noci, vice-rector at the Politecnico di Milano university and a former adviser to the Italian government on infrastructure matters.

This sort of logic was rife at the time. In 2019, Luigi Di Miao, then economy minister, said the reason for joining was to re-balance the trade deficit.

Italy suffered three recessions in a decade and was looking enviously at France and Germany, both of which enjoyed much more profitable relations with Beijing.

At the time, many Italians felt abandoned by Europe, while its populist government was skeptical of the European Union and more than willing to turn to China to fulfill its investment needs.

Observers caution crediting a memorandum that was light on specifics with a two-way surge in trade. Others bemoan the continued focus on trade balances as a metric of economic well-being.

For China, losing Italy – the belt and road’s richest Western member and a key node on the original Silk Road – will be a symbolic blow, even if not unexpected.

Coinciding with his state visit four years ago, Xi wrote that the agreement would cultivate the soil of bilateral relations and ensure that it can come to a new and richer flowering.

The Corona-virus pandemic was just around the corner. Add to this NATO’s proxy war on Russia inside Ukraine, and Europe’s relationship with China has been in a downwards spiral since Conte signed on the dotted line.

But now, with friendlier ties with a Biden administration that has adopted a similarly hawkish stance on China, there is even less room to maneuver.

Once the renewal of the memorandum became a public and international matter, it was not possible for Italy to avoid taking a political decision.

It became extremely difficult for that decision not to be turned into a geopolitical issue in the tensions between the USA and China.

Beijing reads the Italian decision to not renew the MOU as a victory for the USA, Ghiretti said. If we consider that and the public profile of this story, targeted and symbolic retaliation is not off the table.

China Diplomacy / ABC Flash Point News 2023.