Italy is considering borrowing from China-led Asian Infrastructure Investment Bank as part of plans to become the first G7 country to endorse Beijing’s contentious Belt and Road global investment programme.
The two countries are planning to “explore all opportunities for co-operation” in Italy and “third countries”, according to the five-page draft accord obtained by the Financial Times. The wide-ranging agreement would span areas including politics, transport, logistics and infrastructure projects.
In a departure from previous Belt and Road Initiative accords, the two countries would “work together with the Asian Infrastructure Investment Bank”, according to the working document.
The draft shows that Italy is in advanced talks with China and resisting pressure from Washington and Brussels to drop those discussions at a time of rising concerns over Beijing’s ambitions and potential security threat.
The Italian government intends to sign a so-called “memorandum of understanding” on the BRI on March 22, when Xi Jinping, China’s president, visits Rome.
The potential involvement of the AIIB, a multilateral development bank led by Beijing, suggests that Italy is seeking ways to allay Brussels’ concerns by making the accord compliant with EU rules.
This is because the AIIB lends according to international standards, including competitive tenders and environmental impact studies, that are required inside the EU.
“The potential involvement of the AIIB in the BRI in Italy is a game changer,” said one EU diplomat in Brussels. “Without the AIIB’s involvement in lending to projects, it would be difficult for the BRI to fly in a key EU member state.”
Manlio Di Stefano, undersecretary of state for foreign affairs and a member of the Five Star anti-establishment party, said: “We have carefully checked everything and we have set Europe- and Italy-oriented parameters, reaching a total agreement at all levels of government.”
Until now, the overwhelming majority of BRI infrastructure loans have come from the China Development Bank and the Export-Import Bank of China, two bilateral lenders that grant loans in secrecy that are almost always tied to construction contracts for Chinese companies.
This approach has been problematic in the case of the planned railway from Belgrade to Budapest, which has been delayed while the EU insisted that the Hungarian portion of the railway be opened to public tender in line with EU rules.
According to the draft accord, the parties would agree to lift any obstacles to investment and trade barriers. “There will be the signing of a main agreement, plus a series of other satellite agreements, about 20, of various kinds,” said Mr Di Stefano.
China’s BRI plans aim to finance and build infrastructure in more than 80 countries in Eurasia, the Middle East and Africa. The US and big European countries are concerned that it favours Chinese companies, creates debt traps for recipient states and is being used to further Beijing’s strategic and military influence.
The plans, revealed by the FT last week, triggered an outcry in Washington and Brussels. Several central and eastern European countries have already endorsed the BRI, but Italy would be the first G7 country to do so.
“The memorandum will be signed,” Prime Minister Giuseppe Conte said on Friday, insisting that it was “non-binding” and “not an international accord.”
Rome believes that closer collaboration with China can help resolve problems, including its high public debt and illegal migration from Africa. Since the European debt crisis, Chinese companies have bought strategic assets such as the country’s power grid, high-tech manufacturers and luxury brands.
The planned agreement between Beijing and Rome is “very important for Italy because it will allow our companies to be key players in the Belt and Road Initiative plan, to have more leverage in the Chinese market, both to attract investments and to enter that market as protagonists”, said Mr Di Stefano.
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