Italy endorses China’s Belt and Road plan in first for a G7 nation

Chinese President Xi Jinping (L) and Italy’s President Sergio Mattarella address a joint press conference following their meeting on March 22, 2019 at the Quirinale presidential palace in Rome, as part of Xi Jinping’s two-day visit to Italy. (AFP)
Updated 24 March 2019

Italy endorses China’s Belt and Road plan in first for a G7 nation

ROME: Italy endorsed China’s ambitious “Belt and Road” infrastructure plan on Saturday, becoming the first major Western power to back the initiative to help revive the struggling Italian economy.
Saturday’s signing ceremony was the highlight of a three-day trip to Italy by Chinese President Xi Jinping, with the two nations boosting their ties at a time when the United States is locked in a trade war with China.
The rapprochement has angered Washington and alarmed some European Union allies, who fear it could see Beijing gain access to sensitive technologies and critical transport hubs.
Deputy Prime Minister Luigi Di Maio played down such concerns, telling reporters that although Rome remained fully committed to its Western partners, it had to put Italy first when it came to commercial ties.
“This is a very important day for us, a day when Made-in-Italy has won, Italy has won and Italian companies have won,” said Di Maio, who signed the memorandum of understanding on behalf of the Italian government in a Renaissance villa.
Taking advantage of Xi’s visit, Italian firms inked deals with Chinese counterparts worth an initial 2.5 billion euros ($2.8 billion). Di Maio said these contracts had a potential, future value of 20 billion euros.
The Belt and Road Initiative (BRI) lies at the heart of China’s foreign policy strategy and was incorporated into the ruling Communist Party constitution in 2017, reflecting Xi’s desire for his country to take a global leadership role.
The United States worries that it is designed to strengthen China’s military influence and could be used to spread technologies capable of spying on Western interests.
WARM WELCOME
Italy’s populist government, anxious to lift the economy out of its third recession in a decade, dismissed calls from Washington to shun the BRI and gave Xi the sort of red-carpet welcome normally reserved for its closest allies.
Some EU leaders also cautioned Italy this week against rushing into the arms of China, with French President Emmanuel Macron saying on Friday that relations with Beijing must not be based primarily on trade.
There was not even universal backing for the BRI agreement within Italy’s ruling coalition, with Deputy Prime Minister Matteo Salvini, who heads the far-right League, warning against the risk of China “colonialising” Italian markets.
Salvini did not meet Xi and declined to attend a state dinner held in honor of the visiting leader on Friday.
Di Maio, who leads the 5-Star Movement, says Italy is merely playing catch up, pointing to the fact that it exports significantly less to China than either Germany or France.
Italy registered a trade deficit with China of 17.6 billion euros last year and Di Maio said the aim was to eliminate the deficit as soon as possible.
After talks with Italian Prime Minister Giuseppe Conte and Di Maio in the morning, Xi flew to the Sicilian city Palermo for a private visit on Saturday afternoon.
He is due to head to Monte Carlo on Sunday before finishing his brief tour of Europe in France, where he is due to hold talks with Macron and German Chancellor Angela Merkel.


WEEKLY ENERGY RECAP: Keeping things in balance

Updated 08 December 2019

WEEKLY ENERGY RECAP: Keeping things in balance

  • The over-compliance will result in cuts of 1.7 million bpd

Brent crude rose above $64 per barrel after OPEC+ producers unanimously agreed to deepen output cuts by 503,000 barrels per day (bpd) to a total 1.7 million bpd till the end of the first quarter of 2020.

The breakdown is that OPEC producers are due to cut 372,000 bpd and non-OPEC producers to cut 131,000 bpd.

Current market dynamics led to this decision as oil price-positive news outweighed more bearish developments in the US-China trade narrative that has weighed on oil prices throughout the year, with US crude exports rising to a record 3.4 million bpd in October versus 3.1 million bpd in September.

OPEC November crude oil output levels at 29.8 million bpd show that producers were already overcomplying with its current 1.2 million bpd output cuts deal by around 400,000 bpd. 

The over-compliance will result in cuts of 1.7 million bpd, especially when Saudi Arabia continues to voluntarily cut more than its share.

This makes the agreed 1.7 million bpd output cuts pragmatic since it won’t taken any barrels out of the market.

It isn’t a matter of OPEC making room in the market for other additional supplies from non-OPEC sources, as OPEC barrels can’t be easily replaced.

Instead, this is about avoiding any oversupply that might damage the global supply-demand balance.

Saudi energy minister Prince Abdulaziz bin Salman has effectively kept his promise and managed to smoothly forge a consensus among OPEC and non-OPEC producers.

He has also successfully managed the 24-country coalition of OPEC+ including Russia in reaching an agreement.

Despite suggestions otherwise in recent coverage of the Vienna meeting, the deeper cuts announced on Friday have nothing to do with the Aramco IPO. Let’s remember this meeting was scheduled six months ago and the IPO has been in the works for much longer.

The Aramco share sale did not target a specific oil price. If that was a motivating factor it could easily have chosen another time.