Why is Italy pulling out of China’s ambitious Belt and Road Initiative?

Italy has formally conveyed its intention to pull out of the Belt and Road Initiative (BRI) to the Chinese government. It was the only G7 country to have signed up to China’s mega trade and infrastructure project in 2019. While reports of Italy wanting out of the BRI surfaced months back, the European country has only recently sent a diplomatic note to Beijing on Prime Minister Giorgia Meloni’s behalf that Rome would not renew the memorandum of participation. Italy’s membership was due to renew automatically next March unless it notified China of its withdrawal by the end of this year. The note also mentioned that Italy wanted to “maintain a strategic friendship with China”, South China Morning Post (SCMP) reported citing the Italian newspaper Corriere della Sera. Meloni, who had previously called Italy’s participation in BRI “a serious mistake”, has tried to handle the departure cautiously without upsetting China. The news of Italy’s exit, which has garnered much speculation in the last few months, came hours before European Commission president Ursula von der Leyen, European Council president Charles Michel and EU foreign policy chief Josep Borrell are slated to meet Chinese president Xi Jinping and Premier Li Qiang in Beijing today (7 December). Let’s understand why Italy has decided to to part ways with BRI and why is the move significant. End of the BRI road for Italy On the sidelines of the G20 Summit held in New Delhi in September, Italy’s Giorgia Meloni in a private conversation with Chinese premier Li Qiang had said that her country is seeking to exit the BRI project. For the uninitiated, the BRI project , dubbed as the New Silk Road, was launched by Xi Jinping in 2013. It is essentially a vast collection of development and investment initiatives devised to link East Asia and Europe through physical infrastructure. A Bloomberg report at the time stated that Meloni told Qiang that the project was testing Italy’s relations with United States. In a press conference later, Meloni referred to her conversation with the Chinese premier, saying, “A cordial and constructive dialogue on how we can deepen our bilateral partnership… I intend to keep my commitment to visit China… It makes more sense to go to China when we have more information on our bilateral cooperation and how to develop it.” [caption id=“attachment_13108992” align=“alignnone” width=“640”] The BRI project, it seems, has become a thorn for Italy. A news report stated that in Giorgia Meloni’s conversation with the Chinese premier, she said that the BRI project was testing Italy’s relations with United States. AP File Photo[/caption] “Leaving the Silk Road does not compromise relations, but the decision still has to be taken,” the prime minister assured. The BRI project, it seems, has become a thorn for Italy. In the recent past, there have been voices of dissent against the initiative from the Italian side. In July, Italian defence minister Guido Crosetto had told the newspaper Corriere della Sera that the country wanted to “walk back (from the BRI) without damaging relations with Beijing”.

“The choice to join the Silk Road was an improvised and wicked act, made by the government of Giuseppe Conte, which led to a double negative result. We exported a load of oranges to China, they tripled exports to Italy in three years,” said Crosetto in the interview, as quoted by Politico. However, China has previously signalled that leaving the project could spell trouble for Italy. The Chinese ambassador to Italy had earlier in the year warned that there would be “negative consequences” for Italy if it withdrew from the agreement. Italy’s change in stance when it comes to the BRI is much different today from 2019 when it signed to join the project. At the time, Italy was looking to attract investment and expand Italian exports’ access into China’s huge market. Moreover, several Italians felt abandoned by Europe and were more than willing to turn to China to fulfil its investment needs. However, the BRI has not been able to meet Italian hopes and expectations. Despite signing numerous arrangements under the BRI – from pork exports to everything else under the sun – it did little to change the Italy-China economic ties. Since Italy joined the BRI, its exports to China have increased from €14.5 billion to €18.5 billion, while Chinese exports to Italy have grown far more dramatically, from €33.5 billion to €50.9 billion. Also, data reveals that Chinese investment in non-BRI countries in Europe has far outstripped its investments in Italy, with Chinese FDI in Italy dropping from $650 million in 2019 to just $33 million in 2021. This makes it clear that joining the BRI does not necessarily confer a country’s special status with China or guarantee it more trade and investment with China. [caption id=“attachment_13109002” align=“alignnone” width=“640”] Saudi Arabian Crown Prince Mohammed bin Salman Al Saud, left, and US president Joe Biden, shake hands next to Prime Minister Narendra Modi on the final day of the G20 summit in New Delhi on 10 September. AP File Photo[/caption] Bye bye BRI, hello India-Middle East-Europe Corridor While there have been rumblings against the BRI in Italy, the timing of the departure from the project is notable. Firstly, Italy will hold the G7 presidency next year. Hence, the announcement could hold Rome in good stead with its Western allies. Secondly, India announced the new India-Middle East-Europe economic corridor in September, which is being dubbed as a game changer. Leaders of India, the United States, Saudi Arabia, the United Arab Emirates, France, Germany, Italy, and the European Union jointly unveiled this mega economic corridor on 9 September at the sidelines of Day 1 of the G20 Summit. The new project will consist of two corridors. The east corridor will connect India with Gulf countries and the northern corridor will connect Arabian Gulf with Europe. The corridors will consist of a ship-to-rail transit network to facilitate cost-effective transport routes for the countries. The memorandum of understanding read,” It will enable goods and services to transit to, from, and between India, the UAE, Saudi Arabia, Jordan, Israel, and Europe.” The countries also plan to lay down a cable network for electricity and digital connectivity along with pipes for clean hydrogen export. Many view the India-Middle East-Europe economic corridor, which US president Joe Biden called a ‘big deal’, as India’s way of countering the BRI. New Delhi has long been against Xi’s ambitious infrastructure project . This is because the BRI passes through Indian territory illegally held by Pakistan. The BRI has also been receiving increasingly bad press. Many countries that joined it enthusiastically now find themselves staring at a massive debt burden to China. An analysis by the Associated Press “of a dozen countries most indebted to China — including Pakistan, Kenya, Zambia, Laos and Mongolia” found that paying back the debt “is consuming an ever-greater amount of the tax revenue… and draining foreign currency reserves”. Behind this, AP said, “Is China’s reluctance to forgive debt and its extreme secrecy about how much money it has loaned and on what terms, which has kept other major lenders from stepping in to help.” With inputs from agencies