A Forgotten Italian Port Could Become a Chinese Gateway to Europe

https://www.nytimes.com/2019/03/18/world/europe/italy-trieste-china-belt-road.html

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TRIESTE, Italy — For centuries, this cosmopolitan port city at the northern tip of Italy’s Adriatic coast acted as a geographic pivot point between empires. Then, for nearly 70 years, Trieste’s geopolitical star dimmed and its old world mishmash of central European cultures grew stale, like an old strudel in one of its elegant cafes.

Now, courtesy of a rising China, Trieste appears ready to return to the center of a realigning world.

This week, President Xi Jinping of China arrives in Rome for a state visit in which Italy is expected to become the first Group of 7 nation to participate in China’s vast One Belt, One Road infrastructure project. The symbolism is striking — a powerful China drives a crack in the economic alliance that once dominated the globe and delivers a major blow to a Trump administration that has been critical of the Belt and Road Initiative.

For Italy, the deal would open the country to greater Chinese infrastructure investment, particularly in ports like Trieste. Officials here say they expect Beijing-backed conglomerates, such as the China Communications Construction Company, to bid hundreds of millions of euros for infrastructure concessions.

For China, having a toehold in one of Europe’s historic ports would bring favorable customs conditions, a faster trade route to the heart of the Continent and direct access to railroads for moving its goods into the European Union.

“Fundamentally, what’s happening is that the port of Trieste is returning to the logistical role for Europe that it had for the old Austro-Hungarian empire,” said Zeno D’Agostino, the president of the Trieste port authority, whose office is sprinkled with gifts from Chinese delegations and a book about European-Chinese cultural relations.

To walk through Trieste is to witness how the city has already opened to China. Chinese tourists shop for the city’s trademark Illy coffee and take pictures with their Huawei phones of the elegant Caffè Degli Specchi. A brand-new cruise ship, built in nearby shipyards expressly for Chinese passengers, is docked in the central waterfront piazza, preparing to set sail on Marco Polo’s path to the Far East.

Most significant, construction workers in scuba gear have been laying foundations near the site where a new pier is expected to become China’s home in the industrial port. In the years after World War II, the Americans held great sway in Trieste, and Washington has now sought, so far unsuccessfully, to stop Italy’s deal with Mr. Xi, characterizing the Belt and Road Initiative as an economic and potentially military threat.

While other members of the European Union, including France and Germany, have also expressed reservations about the deal with China, supporters in Italy say that there is nothing to worry about and that the critics are merely upset that Trieste — and other Italian ports, like Genoa and Palermo — are going to cut in on their business. They reject comparisons to the port of Piraeus in Greece, which China essentially bought, and say Italian law makes such an acquisition or the laying of Chinese debt traps impossible.

Michele Geraci, an Italian economic development minister who is running the negotiations with Beijing, said in an interview that Chinese ships carrying materials from home or its vast network of interests in Africa through the Suez Canal simply needed to get their goods to central European markets as quickly as possible.

“Trieste meets that requirement swiftly,” he said.

Italian officials say their American counterparts initially seemed disinterested in the deal. Deputy Prime Minister Luigi Di Maio, the leader of the Five Star Movement, has made several trips to China in recent months, nearly signing the accord during a November visit to Beijing, they said. After the fact, American diplomats began making their case, but the Italians said the deal was noticeably not on the American radar during recent high-level meetings in Washington.

But this month, Garrett Marquis, spokesman for the American national security adviser, John R. Bolton, sharply attacked the deal in a Twitter post and in several interviews, while the National Security Council’s official Twitter account also issued a reproach on March 9.

“Endorsing BRI lends legitimacy to China’s predatory approach to investment and will bring no benefits to the Italian people,” the tweet stated, referring to the Belt and Road Initiative.

The Americans have also tried to pressure leaders of the nationalist League party, which is part of the governing coalition in Italy. This month, Trump administration officials and, separately, the former White House official Stephen K. Bannon, met with party leaders; Mr. Bannon said that he had warned his Italian allies in the League against what he called China’s “British East India Company model of predatory capitalism.”

Awakened to the growing Chinese influence, American officials have had more success pushing Italy to avoid using the new 5G networks of the Chinese electronics giant Huawei, which Washington warns could be used by Beijing to disrupt and spy on communications networks. In recent days, the Italians have excised any mention of technology and communications from the Belt and Road agreement, people familiar with the negotiations said.

In Trieste, city leaders are focused on the economic benefits to the port.

Beyond its convenient location, the city on Monday celebrated the 300th anniversary of Emperor Charles VI of Austria declaring it a “free port.” That status still confers special privileges, with no customs charges or time limits on storage for goods.

If the deal goes through, proponents say they envision Chinese companies working with Italian counterparts, hiring local laborers to assemble imported goods before putting them on trains to the rest of Europe or on ships back to China. If the amount of work and components used measure up to customs requirements, those products could be labeled Made in Italy.

But some business leaders say that fully embracing the Belt and Road program would bring risks and could complicate efforts to bring other investment to Trieste.

Vittorio Petrucco, chairman of I.CO.P, a construction company doing work in the port, said he and a former Microsoft consultant in Trieste, which has a vibrant research sector, had begun exploring his “dream” of building an underwater data center that would cool the servers of American tech giants.

“I prefer to look West instead of East,” Mr. Petrucco said of his project, planned for an area near an old ironworks factory that looms above the pier envisioned for use by the Chinese. He added that both projects would take years to build and worried that all the American opposition and controversy surrounding the Belt and Road agreement would poison the waters for his proposal.

“It’s sad,” he said, “but there’s nothing I can do about it.”

Roberto Dipiazza, the mayor of Trieste, said that the United States could scuttle the deal if it really wanted to. He said that his city had much to gain from closer ties to China, but that the Chinese had even more to gain from his port’s deep harbors, customs benefits and rail yards.

“We will find a point of agreement between China and the U.S.,” he said, showing off a Make America Great Again cap signed by President Trump that he had received as a gift. Italy, he noted, was caught “in the middle.”

Some of Trieste’s most entrenched political players think Italy is compromised by such a position.

Giulio Camber, a veteran lawmaker considered by many to be the political boss of Trieste, said he no longer had any interests in the port, and that his opposition to the deal was motivated by his distrust of what he called China’s Communist dictatorship.

As light sliced in through the closed curtains of his office, illuminating his cigarette smoke, gilded furniture and oil paintings, Mr. Camber said the Chinese were behind many of the Turkish businesses exporting goods into the port. Beijing, he said, would feast on the Italians just as they did on the Greeks before them.

“They are the weakest,” he said of the Mediterranean countries.

Mr. Camber dismissed the local and national assurances about Chinese expansion, saying that Beijing would easily outmaneuver officials in Rome.

“It’s like the world champion in chess playing with a couple of guys who play for fun at the Caffè Degli Specchi,” he said, referring to the famous cafe in Trieste’s main square, the Piazza Unità d’Italia. “You can’t imagine what the world’s best chess player is up to.”