Italy mulls ‘soft’ way out, joins new project challenging China’s Belt and Road Initiative

By Giada Zampano

ROME (AA) – Italy is seeking a way to leave China’s Belt and Road Initiative (BRI) without derailing its relations with Beijing, as the Asian giant sees its global economic ambitions undermined.

Confirming its intentions, Rome has joined a project part of the Partnership for Global Infrastructure Investment (PGII) – a West-led initiative for funding infrastructure projects across the world.

The PGII includes the new India-Middle East-Europe Economic Corridor (IMEC), unveiled at the Group of 20 (G-20) summit in New Delhi on the weekend, and is seen as a counter to the BRI.

The right-wing government of Premier Giorgia Meloni has openly said it is considering exiting the agreement signed with China in 2019, when Italy shocked the US and European partners by becoming the first Group of Seven (G-7) country to join the BRI, the largest-ever global infrastructure project.

Under the initiative, Chinese banks and companies have financed and built everything from power plants, railways, highways and ports to telecommunications infrastructure, fiber-optic cables, and smart cities around the world.

With its five-year memorandum of understanding up for renewal in March 2024, Italy seems poised to withdraw from the deal after expressing frustration with the initiative’s unmet promises.

Italy is expected to announce by December if it is officially ending its participation in the landmark Chinese project.

Under the original agreement, the two parties can end the deal after five years, otherwise the partnership gets extended for another five-year term. Italy has until the end of 2023 to inform China on whether it wants to end the deal.

- Exit imminent?

Meloni met China’s Prime Minister Li Qiang on Saturday, on the sidelines of the G-20 summit in New Delhi, and the BRI issue was on the table.

“There are European nations which in recent years have not been part of the Belt and Road but have been able to forge more favorable relations (with China) than we have sometimes managed,” Meloni told a press conference at the end of the summit.

“The issue is how to guarantee a partnership that is beneficial for both sides, leaving aside the decision that we will take on the BRI,” she added.

Meloni stopped short of unveiling what her final decision would be, but reminded that the Italian Parliament is assessing the situation.

Meanwhile, Italy being part of the memorandum of understanding signed between India, US, Saudi Arabia, EU, UAE, France and Germany to establish the IMEC was seen as a move confirming its imminent exit from the BRI.

In response to the infrastructure projects being undertaken and funded by China under the BRI, the G-7 decided to present its own alternative mechanism.

The IMEC is being envisioned as a network of transport corridors, including railway lines and sea lanes, that is expected to aid economic growth through integration between Asia, the Arabian Gulf and Europe.

On the opposite side, in an attempt to overcome Rome’s skepticism, China insists the BRI has “borne fruit” in Italy.

Foreign Minister Wang Yi said cooperation with Italy under the BRI has been positive, with high-quality Italian products having entered “thousands of households” in China.

“The thousand-year friendship inherited from the ancient Silk Road has endured,” Wang said during a recent visit to Rome.

Analysts stress that Italy had a few reasons to be attracted to the BRI.

Having suffered through three recessions within a decade, Rome was looking for investment and expand Italian exports’ access into China’s huge market.

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

China also had its own reasons for courting Italy.

The country served as a major terminus along the ancient Silk Road, and Italy’s inclusion in the BRI helped President Xi Jinping present his signature foreign policy initiative as the start of a golden era of Chinese influence.

The two countries also have long-time connections: Italy is home to the largest Chinese population in Europe, while the countries share deep trade linkages in the production of fabrics, leather goods and more.

As China looked to increase its influence in Europe, and tried to exploit divisions between Washington and Brussels, Italy appeared as the perfect entry point.

- The US factor

The first clear signs of Italy’s intention to exit the BRI came when Meloni met President Joe Biden at the White House in July.

In a joint statement, the two leaders did not openly mention Italy’s possible withdrawal from the deal.

However, the statement did note that the two leaders “reaffirm their commitment to … strengthening economic resilience and economic security, including efforts … to increase our collective assessment, preparedness, deterrence and response to economic coercion.”

The unstated reference was unequivocally toward China.

A few days later, Italy’s Defense Minister Guido Crosetto said the country’s 2019 decision to join the BRI was both “improvised and atrocious.”

According to Crosetto, the government of former Premier Giuseppe Conte, leader of the populist Five Star Movement, had signed the arrangement expecting to increase Italian exports to China.

Instead, he noted, the agreement “led to a double-negative result.”

“We exported a load of oranges to China, they tripled exports to Italy in three years,” he said.

Chinese media and government spokespersons have warned of the “negative impacts” of an Italian withdrawal.

“China could try to punish Italy in some ways. After all, it is in its own right to do so,” said Francesco Sisci, an Italian sinologist, author and columnist who lives and works in Beijing.

“Italy joined the BRI out of its volition and no one forced it to. In any case, it is the right time for Italy to start having a better, comprehensive and well-reasoned Asia policy. Italy never had any,” he added.

- EU fires back

The EU itself has come to view the BRI as a serious challenge.

In response to the BRI, it created in in 2021 what it dubbed the Global Gateway, described as “the EU’s positive offer to partner countries in support of their resilience and sustainable development.”

The EU pledged to invest €300 billion ($350 billion) between 2021 and 2027 in projects ranging from fighting climate change to health, energy, transport, infrastructure and digitalization.

European funding pales in comparison to the more than $2 trillion that Beijing has poured into overseas construction projects and various forms of investment over the past two decades.

However, the Global Gateway means that the EU recognized that words alone will not wean any country off the BRI.

China’s flagging economy, caused in part by Xi’s determination to prop up inefficient state-owned enterprises, is also hurting the BRI and creates a real opportunity for the Global Gateway to serve as a credible alternative to the Chinese effort.

If the EU can keep expanding its own Global Gateway efforts as the Chinese economy continues to flounder, perhaps other BRI participants will follow Italy’s lead and consider withdrawing from the “flagship project” Xi launched with so much fanfare a decade ago.

- ‘Very tricky’ way out

However, political analysts noted it will be difficult for Italy to find a “soft” way to walk back from the deal without irrevocably damaging relations with China.

“Much depends on the management of the issue,” Sisci said.

“It is very tricky: Italy made bad mistakes, and the future management will need even greater and better skills.”

He stressed that as America also launched its own initiative, other countries might have their own projects too.

“Then China might want to think that because of the many copycat initiatives, the idea of the BRI was good. Or instead, because of the difficulties in getting other important countries to join it, it may realize there are problems in its implementation,” he concluded.

Others observed that Meloni knows well how crucial this pullout is for the US, and how important it is for Italy to be fully consistent with its Euro-Atlantic stance.

“On the other hand, Meloni is hesitant. Indeed, the pressure from her Eurasianist coalition partners has gone up, and a sizeable chunk of the Italian business community has besieged her to keep the BRI as is and avoid a Chinese retaliation,” said Francesco Galietti, founder of the think tank Policy Sonar.

“Meloni has decided to buy time, but this is a dangerous game. The real question is what she will have to offer China in exchange. We’ll see on which side the balance will tip.”