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China Drops Its First 'Belt and Road' Anchors in the G7—at Two Italian Ports

David Meyer

Despite protestations from the U.S. and disquiet within its own government, Italy on Saturday signed up for the Belt and Road Initiative—China’s foreign-policy centerpiece that aims to create new trading routes spanning Asia, Europe and Africa.

China and Italy signed a memorandum of understanding including 29 agreements that cover everything from satellites and media to banking, agriculture and natural gas. Italian Deputy Prime Minister Luigi Di Maio said the deals were worth €2.5 billion ($2.83 billion) but could end up being worth €20 billion ($22.62 billion), according to Reuters.

Italy hopes to benefit handsomely from Belt and Road. Metals plant-builder Danieli will get to build a steel plant in China. Power engineering firm Ansaldo Energia will supply parts for a new Chinese power plant. Italian exports will get more promotion in China via the Suning ecommerce group, and Chinese tourism in Italy should also see a boost.

Power via ports

All of this is great news for recession-hit Italy, which wants to close its trade deficit with China. But what does China get?

Italy is the first founding member of the European Union and the first G7 member to join the Chinese initiative. Its new memorandum of understanding with China clearly brings extra prestige to Belt and Road. But it also provides a useful physical foothold in the region.

Two of the deals signed Saturday will see the China Communications Construction Company (CCCC) develop and manage the Italian ports of Genoa and Trieste. As noted by the South China Morning Post, Genoa—Italy’s biggest port—is well established, but Trieste, next to the Slovenian border, provides a fresher opportunity.

An aerial view of the commercial harbor of the northeastern city of Trieste along the Adriatic Sea on October 8, 2017.

According to an official statement about the Trieste deal, CCCC will develop the rail infrastructure around the port in order to “increase of the influence of the port of Trieste both in Central Europe and in the Chinese maritime markets.”

“Our commitment is to support the exports to China and the Far East of our [small and medium-sized businesses], which do not have the appropriate size to deal with this type of investment,” said Zeno D’Agostino, the president of the Eastern Adriatic Sea Port Authority (AdSP.) “The AdSP will enable Italian companies to develop in Chinese logistic and port platforms that allow the ‘Made in Italy’ strategy to develop in China.”

American anger

China already majority-owns Greece’s crucial Piraeus port, a natural gateway for goods coming in from the Far East via the Suez Canal. But Trieste is far closer to the Central and Eastern European markets that China wants to reach through Belt and Road.

The Italy-China deal does have its limits, which is likely a result of American fury and skepticism from other Western European countries. Critics characterize the Belt and Road Initiative as “debt trap diplomacy,” noting that previous deals have seen China take over China-developed assets that the host countries couldn’t pay off, such as Sri Lanka’s Hambantota port. And the U.S. in particular is stressed out about the role played by the world’s biggest telecommunications equipment firm, China’s Huawei, in the imminent deployments of 5G mobile networks.

Di Maio insisted Sunday that the MOU “contains nothing for [Washington] to worry about, nothing relating to 5G or any agreement on strategic telecommunications.”

Clashing on China

However, the situation also reflects differing opinions within Italy’s populist coalition government. Di Maio’s Five Star Movement is pro-China, while the far-right League party is keener on staying on the U.S.’s good side. The League’s Matteo Salvini, who is Italy’s other deputy prime minister, made a point of avoiding a state dinner on Saturday where China’s President Xi Jinping made an appearance.

Xi went on to France, where he met President Emmanuel Macron for dinner on Sunday. Macron tweeted about France and China’s “strategic partnership” and multilateralism, but he’s a hawk when it comes to Chinese trade and Xi won’t be securing anything comparable to the Italian MOU on that visit.

The German foreign minister, Heiko Maas, also expressed a warning for Italy. “If some countries believe that they can do clever business with the Chinese,” he told the Welt am Sonntag newspaper, “then they will be surprised when they wake up and find themselves dependent.”