Why Italian PM Meloni pulled his country out of the Belt and Road Initiative

Italy Informs China of Its Decision to Leave the Belt and Road Initiative

Italian Prime Minister Giorgia Meloni's administration has informed Beijing of her country's decision to withdraw from the Belt and Road Initiative. Italy was the only major Western country to join the Belt and Road Initiative in 2019, one of China's most ambitious trade and infrastructure projects. The move was heavily criticized at the time by the US and others.

China naturally reacted to Italy's decision to withdraw from the program: "China firmly opposes slander that undermines the Belt and Road cooperation," was the Chinese Foreign Ministry's own meaningful reaction. During the visit of EU leaders to Beijing last Thursday, Chinese President Xi Jinping also spoke of China's desire to have broader relations with Europe. During this meeting, Xi implicitly emphasized the influence of Washington and underlined that China-EU relations should "eliminate all forms of interference". On the other hand, the President of the European Commission, Ursula von der Leyen, vaguely pointed out that although China is the EU's most important trading partner, "there are clear imbalances and differences that we need to address together!" and that the relationship between the parties should be put on the table.

Italy was the largest signatory to the Belt and Road Initiative among the 18 EU members, especially in the east and south of the continent. Italy's membership was to be automatically renewed in March next year unless Italy notified China of its withdrawal from the project by the end of 2023. Prime Minister Meloni made no secret of the fact that he considered the decision to join the Belt and Road Initiative during the populist government of Giuseppe Conte to be a serious mistake for Italy.

What is the Belt and Road Initiative (BRI)?

Launched by Chinese President Xi Jinping in 2013, the Belt and Road Initiative aims to invest an estimated $1 trillion (£794 billion; €925 billion) in Asia and Europe. The projects, including new and upgraded railways and ports, aim to connect China to Europe and other parts of Asia.

Throughout history, the Silk Road has been one of the most important international trade networks, and China is revitalizing the Belt and Road initiative in modern ways. China has made waves around the world with this unique project, which is based on political and economic considerations such as providing access to Asian countries to eliminate regional and maritime problems by exporting local development policies, controlling economic decline and exploiting new sources of growth, improving dialogue with coastal countries and increasing its influence in the West.

For these reasons, the purpose of the BRI project was framed within the framework of the 5 principles expressed by Chinese President Xi Jinping at the World Economic Forum in 2019:

Developing an unimpeded trade network,

Accelerate policy implementation and communication,

Increase monetary efficiency and the circulation of money,

Improve road connections between countries,

To increase the interaction of people and societies.

Within the scope of the project, which aims to operate on three continents, railways, sea and land routes are being improved, while economic integration initiatives are being carried out in some regions. It is aimed to increase the economic growth of the countries involved in the One Belt One Road project, especially China, and to realize regional integration in many aspects, especially in the economy, between countries and even between three continents. Since the project came into effect in 2013, foreign trade and transportation data have been increasing. The stakeholders involved in the project have expectations that international trade and security will increase further, depending on the completion of the infrastructure works of the project.

Belt and Road Initiative and Turkey

From Turkey's perspective, the BRI invites significant gains. Export goods from China will first be transported to Kazakhstan and Turkmenistan, then from Turkmenistan to Azerbaijan's Alat Port via the Caspian Sea, and from there to Europe via Georgia and Turkey. I see the opening of the Marmaray line and Yavuz Sultan Selim Bridge, which are an important part of this route, as an important development. With this Europe - Caucasus - Asia Transport Corridor (TRACECA) project, which is planned to connect Europe and China, it is aimed to reduce the transportation of goods and people from China to Europe to 15 days by rail.

The Belt and Road Initiative and Greece

Within the framework of the BRI, the commissioning of Greece's Piraeus Port Project should be noted as an important development. The port has been operated by the largest shareholder COSCO Shipping (Hong Kong) Co Ltd. since August 10, 2016. Within the scope of the project, it is stated that 290 million Euros have been invested in the expansion of the cruise terminal, the development of a new multi-storey roll-on roll-off ship dock garage and a ship repair dock. Piraeus Port, which is the most important meeting point in the Mediterranean, is also exemplified as the fastest developing project in the BRI dimension.

Italy - China Relations in the Context of BRI

Italy, like Greece, had shown a willingness to be part of this massive global project and its catalyst in the Mediterranean. Italy's withdrawal from the Belt and Road Initiative is expected to have a positive impact on the development of transatlantic relations. It should also be seen as an important development for other countries in the Western world that are interested in closer relations with China. The atmosphere in the Western world in the aftermath of the Russia-Ukraine war, which has developed against Russia and implicitly against China, has inevitably affected Italy's earlier decision to participate in the Belt and Road Initiative. 

While reaffirming its desire to maintain a "strategic friendship" with China, the Italian government sent an official note to Beijing that it would not renew the agreement on the Belt and Road. Italy's decision to leave the Belt and Road Initiative, signaled for months by Prime Minister Giorgia Meloni, was announced to the Chinese government just before the start of the EU-China Summit in Beijing. This undoubtedly cast an immediate shadow over the first face-to-face EU-China Summit since 2019. Perhaps the parties did not have high expectations for concrete results at this summit, but I believe that Italy's decision to withdraw could have been postponed for a more reasonable meeting. For some reason, Rome did not want to wait for the summit to end.

According to some, Italy's decision to leave this global initiative was motivated by a critical 'policy divergence' that could undermine the Beijing-Rome alliance. The apparent problem is that China is taking a different path on democratic values and human rights. Meloni criticizes China for everything from its mistreatment of the Uighur community in Xinjiang to its mismanagement of the COVID-19 pandemic. He warns of the risks of a possible attack on Taiwan. It criticizes Beijing's position on Russia's invasion of Ukraine in 2022.

China Classified as a Threat for the First Time in NATO's 2022 Strategic Concept Paper

In the new Strategic Concept document adopted by NATO leaders at the 2022 Madrid Summit, China was mentioned as a threat for the first time. Russia was categorized as the "most significant and direct threat". "China's ambitions and challenging policies challenge our interests, security and values. While China uses a wide range of political, economic and military tools to increase its global footprint and project power, it remains uncertain about its strategy, intentions and military buildup." "China seeks to control key technological and industrial sectors, critical infrastructure and strategic materials and supply chains. It uses its economic power to create strategic dependencies and increase its influence. It seeks to subvert the rules-based international order, including in space, cyber and maritime domains. The deepening strategic partnership between China and Russia and their mutually reinforcing attempts to undermine the rules-based international order are contrary to our values and interests."

Under these circumstances, Rome, which shook hands with Beijing on the Belt and Road Initiative in 2019, needed to reorient itself, and the new government had the courage to communicate to Beijing its decision to leave, in a sense avoiding the ease of blaming the old. However, Italy did not decide only from a NATO perspective, from the point of view of damaging transatlantic relations. A trade imbalance between China and Italy has developed to Italy's detriment since 2019. Moreover, Chinese foreign investment in Italy had almost come to a standstill.

Widening Trade Imbalance Against Italy

Italy's membership of the BRI was seen as one of China's most symbolic achievements in Europe. Beijing made no secret that it saw it as a sign of China's growing political and diplomatic role in the world. For China, establishing a landing point in Europe's third largest economy and a G7 country was critical to China's European strategy. It also guaranteed China access to Italy's advanced industries, brands and technologies. While Italy was the real prize for Beijing, by 2019, fifteen other EU countries had joined the Belt and Road Initiative.

Beijing's move to Italy came on the heels of more than a decade of economic hardship in Italy. Some Italian policymakers, seeking to overcome their difficulties, were inclined to see China as a prince on a white horse. The menu of Italy's Belt and Road Initiative Memorandum of Understanding signed in this context included fifty agreements covering six main areas: policy dialogue, transport and infrastructure, trade and investment, financial cooperation, people-to-people links and green development cooperation.

In 2019, the Italian government aimed to increase exports and attract Chinese investment in China through an agreement on "barrier-free trade and investment". However, for various reasons, the expectations did not materialize as Italy had hoped. In fact, trade between China and Italy has increased 1.6 times since 2019, from $50 billion to $80 billion. However, this development was to China's benefit rather than Italy's. While China's sales of goods to the Italian market amounted to 35 billion dollars in 2019, by 2022 this had risen to around 61 billion dollars. Italian exports to China, on the other hand, only slightly increased from $14.5 billion to $19 billion. The trade imbalance between the two countries in favor of China has widened, flooding the Italian market with Chinese products, which account for 9 percent of Italy's total imports (the second highest in the world). However, China is only the tenth largest export market for Italy. This resulted in less than 3 percent of Italy's total exports to China.

The Italian parliament has played a crucial role, using the "golden power" law to protect national strategic assets. First enacted in 2012 to cover defense and national security, it was updated in 2019 to cover 5G technology and later expanded to cover a wide range of sectors, including healthcare, raw materials, infrastructure, robotics, finance and media. This law is seen as one of the strongest screening laws in the EU.

In 2022, the Italian government further consolidated this strength with the addition of pre-notification procedures to support investment screening mechanisms. After taking office in 2021, one of Draghi's first priorities was to enforce the "golden power" rules, focusing not only on strategic investments in infrastructure, but also on blocking access to strategic technologies and protecting struggling national companies. He blocked purchases in semiconductor manufacturing and expanded the scope to include food, applied materials and drone deals signed under the previous government.

Conclusion

The Belt and Road Initiative is China's economic, foreign policy and power projection tool. It is a project at the center of Chinese leader Xi Jinping's global ambitions. Current Chinese state policy aims to reshape global norms and institutions to Beijing's liking. The Belt and Road Initiative currently covers 149 countries, thirty-five of them in Europe and Eurasia. For now, I do not expect Italy's exit to do more than discredit the Belt and Road Initiative. However, Italy's exit will force other countries in Europe to re-examine their views on the Belt and Road Initiative. The US, which has opposed this initiative from the beginning, is undoubtedly manipulating European countries in order to keep Europeans out of this project and to protect its own geoeconomic interests. It has done this in Italy and it has been successful. Italy was probably the domino at the beginning. Now this stone has fallen. I believe that we will witness the collapse of other dominoes. I believe that the exit from the Belt and Road Initiative will not be limited to Italy alone, but will be followed by others.

Moreover, from now on, China will increasingly be on the agenda of NATO summits, or rather it will be brought up by the United States. It will serve as an important lever to keep the Western world and the members of the Alliance united against China. In this context, the countries involved in the Belt and Road Initiative will be under direct pressure and influence of the US. In the coming years, Beijing's favoritism and investment support to the countries that will remain in this initiative may prevent these exits to a certain extent, but in the long run, the spirit and future of transatlantic relations and NATO's perspective on China will be the main determining factors. In this context, it may not be possible for Turkey to stay out of the geostrategic and geoeconomic policies developing against China within the Alliance. Turkey, which is still oriented towards the West in the new world balances, may see it as a compulsory decision in terms of its own strategic interests to remain outside the Belt and Road Initiative, similar to what Italy has done, if it does not turn its gaze towards China and Russia. It is too early for Turkey to seek such a decision. However, preparing for possible options and scenarios in the future will do no harm in terms of protecting Turkey's rights and interests.

References

Valbona Zeneli, “Italy’s ‘arrivederci’ to China’s BRI could be a template for others”, New Atlanticist, December 10, 2023, https://www.atlanticcouncil.org/blogs/new-atlanticist/italys-arrivederci-to-chinas-bri-could-be-a-template-for-others/

Kopuk, E. & Bayraç, H. N. (2021). Bir Kuşak Bir Yol Projesi ve Ekonomik Etkileri. Alanya Akademik Bakış, 5(3), Sayfa No.1353-1374. https://www.researchgate.net/publication/354602650_Bir_Kusak_Bir_Yol_Projesi_ve_Ekonomik_Etkileri/link/61b1e6570c4bfb675178c095/download?_tp=eyJjb250ZXh0Ijp7ImZpcnN0UGFnZSI6InB1YmxpY2F0aW9uIiwicGFnZSI6InB1YmxpY2F0aW9uIn19