Italy withdraws from China’s Belt and Road Initiative and expands cooperation with Taiwan

Italian officials have privately hinted to Taiwan officials that they might withdraw from China’s Belt and Road Initiative while pursuing semiconductor cooperation with the island. Bloomberg writes about this, citing sources.

It is noted that representatives of the Italian Ministry of Enterprise Affairs discussed during recent meetings in Taipei the expansion of cooperation in the production and export of chips. The final decision to withdraw from the Belt and Road will have to be made by Prime Minister George Meloni. In addition, according to Taiwan Radio International, the island plans to soon open its second representative office (de facto consulate) in Italy, in Milan. The first such institution operates in Rome under the banner “Representation of Taipei”.

Italy in March 2019 signed a memorandum of understanding with China to jointly promote the Belt and Road, which happened during a visit to Rome by Chinese President Xi Jinping. She became the only one of the G7 countries to join the Chinese initiative. According to the document, the parties intended to cooperate in the development of roads and railways, bridges, civil aviation, ports, and the energy sector. In Italy, at the time, the populist Five Star Movement, which was part of the ruling coalition, was the main supporter of the agreement. Mario Draghi, who became Prime Minister from the Democratic Party in 2021, was already much more skeptical about cooperation with Beijing. The practical results of cooperation over the past four years have been insignificant due to the pandemic, but its maintenance is still of great symbolic importance for Beijing.

According to the data of the General Administration of Customs of the PRC, in 2022 the trade turnover between Italy and China amounted to $77.8 billion, which is $23 billion more than in 2021 (Chinese exports to Italy in 2022 amounted to almost $51 billion, and imports – almost $27 billion). Italy also has a large Chinese diaspora of about 300,000 people. By comparison, trade between Italy and Taiwan reached only $5.57 billion in 2021.

Prior to their election, Meloni and her allies from the far-right Brothers of Italy party criticized the 2019 memorandum and China’s position on Taiwan, but since coming to power in the fall of 2022, they have refused to comment publicly on this topic. The agreement with China will be automatically renewed in 2024 if Italy does not withdraw from it.

As Bloomberg pointed out, already in 2019, Washington and Brussels expressed concern about the possible access of China to Italian telecommunications and ports. Bloomberg notes that now Rome’s decision to participate in the Belt and Road is being closely watched in Washington and other Western capitals. Meloni’s decision will signal her willingness to put her pro-American rhetoric into practice. In addition, the Italian authorities are exploring ways to limit the influence of the Chinese company Sinochem on the Italian tire manufacturer Pirelli SpA (Sinochem is its largest shareholder).

The memorandum of accession to the Belt and Road was originally supposed to promote the growth of the Italian economy and increase exports to China, says Elena Maslova, Associate Professor at the MGIMO Department of Integration Processes of the Russian Foreign Ministry. This did not happen, so “we can say that the Italians were somewhat disappointed in this memorandum, since it did not bring any economic benefits to their country,” the expert believes.

At the same time, Meloni is trying to avoid becoming as dependent on China as the country once was on Russian energy resources. And therefore, now the question of the future fate of Italy in the “Belt and Road” comes to the fore: the term of the memorandum, which implies automatic prolongation without objections, expires. If the Italian authorities decide to withdraw from it, they will need to approve this decision in parliament and notify China, which will undoubtedly lead to a deterioration in bilateral relations, Maslova believes.

Indeed, since 2019, not a single significant project has arisen between Italy and China, and the specific initiatives envisaged by the memorandum have not been implemented. “The coronavirus pandemic has played a role here. One of the most significant projects between the parties within the framework of the Belt and Road was the launch of a trade train between the Chinese Chengdu and the Italian town of Meltso, but it has not received its development,” Maslova notes. According to the expert, in cooperation with Taiwan for Italy, access to semiconductor technologies comes to the fore, but at the same time, the EU countries are currently trying to develop them themselves. Therefore, there is no reason to say that the Italian government has strategically important economic and strategic interests in strengthening cooperation with Taiwan. Meloni, according to Maslova, is faced with the task of “confirming her trustworthiness and loyalty” to Atlantic values ​​and the United States.

For China, it is obvious that the situation in Europe is changing and its countries have less freedom of maneuver and less chance of gaining “strategic sovereignty,” said Alexander Lomanov, Deputy Director of IMEMO RAS. This is also evidenced by the actual collapse of the 17 + 1 dialogue between China and 17 countries of Central and Eastern Europe, the expert adds. The disappointment in Italy with the low economic return of the Belt and Road cooperation is indeed present, but it must be taken into account that China was closed for three of these four years due to the pandemic. The likely rupture of the agreement by Italy will be a prick for Beijing and a reminder that the sovereignty of European countries is limited by the course that is sent from Brussels and Washington, but will not cause a very sharp reaction, Lomanov is sure. Rome’s position on Taiwan is a completely different matter, since Beijing considers this story a “red line” for itself, the analyst recalls. At the same time, China will be watching to what extent the actions of the Italians will fit into the “one China” policy and whether there will be steps hinting at raising the status of relations with Taiwan. However, the announced plans do not yet fall under such a description, especially if the second representative office of the island in Italy does not have signs of a diplomatic consulate of a separate state, Lomanov concludes.