China’s cooperation with Italy, Switzerland carefully coordinated

China’s cooperation with Italy, Switzerland carefully coordinated

Given the debate between Italy and China as to the development of the ports of Trieste and Genoa, that Beijing would finalize a memorandum of understanding (MOU) to cooperate with Switzerland so soon after Italy should come as no surprise.

The Italian government would prefer Genoa to be developed before Trieste, primarily because the former has an existing rail network connecting to the hinterland. This network has been developed over the last 100 years. Not only does it connect the Italian industrial heartland of the Torino and Milano regions, it also connects to Switzerland, southern/central Germany, and eastern France. There is anecdotal evidence that the French and Swiss governments also pursued the Genoa agenda to soften some of the impact of a G7 country signing up to China’s Belt and Road Initiative (BRI). From a trade perspective, this is regarded as a more significant area than the site at the Port of Trieste preferred by Beijing.

Not only has the Port of Trieste been neglected since the Habsburg Monarchy was forced to withdraw, it does have a relatively poor rail network that supplies its hinterland via the Trans-European Transport Networks (TEN-T), with connections to Austria, Czechia, Hungary, Slovakia, and Slovenia. Despite recent attempts to improve conditions in Trieste, the Italian government won’t invest in the port.

However, Slovenia continues to develop its Koper port, which offers an alternative marine connection to the TEN-T. Further, new Austrian and Hungarian rail networks can be supplied by all three ports in the immediate area — Trieste, Koper, and Rijeka in the neighboring Croatia.

Complicating the situation at Trieste are issues relating to the sovereignty of the city and its free territory. There are competing claims, with evidence pointing to Trieste being a sovereign entity and that Italy does not have status over the port and free territory of Trieste. This issue has been raised at the UN and other international forums. 

Rather than get itself embroiled in this geopolitical quagmire, China can demonstrate its port redundancy strategy through the Swiss MOU. Essentially, it can be argued that they use the Swiss pivot to bolster developments in Genoa, Koper, and Rijeka, while at the same time securing significant international socioeconomic gains.

Further developments that support the Swiss pivot include the Port of Rijeka’s recently announced rail infrastructure upgrades and Switzerland’s SBB Cargo ordering 20 locomotives from Siemens. These developments are strategically important in securing market entry into Europe, particularly as Rijeka’s funding comes from Europe and offers an alternative to the China backed Trieste-TEN-T rail connection and intermodal corridor. The Swiss locomotive order, on the other hand, demonstrates the redundancy planning around Genoa as an alternative port and rail connector into Europe for China.

The Port of Rijeka has aims to make itself the largest intermodal terminal connecting the northern Adriatic. The port has begun implementing plans to increase its container handling capacity by developing railway infrastructure that reduces congestion by facilitating the transition of road to rail freight.

Expected to be concluded by 2022, the project will be executed in three stages. The first stage includes the development and upgrade of 12 tracks in the port with rail connections with the final stage constructing four 400-meter tracks on an extension of the container terminal together with two tracks allowing for portal cranage. Importantly, 85 percent of the $350 million in costs are being funded by the EU’s Connecting Europe Facility, making this essentially a European project that offsets some of the fears of China controlling the TEN-T Adriatic-Baltic trade corridor through the Port of Trieste.

However, Switzerland has also made some important changes with regard to its international cargo operations. These changes have come subsequent to the Swiss-China MOU and points to the flexibility of the BRI, as well as Beijing’s desire for built-in redundancies. While much of the talk around SBB Cargo’s order for 20 new Vectron multi-system locomotives from Siemens has been focused on a move toward lower emissions, what is lost in the analysis is the capability of these locomotives to operate along the Rhine-Alpine corridor. Because the trains are equipped with the European Train Control System, there is no need to change locomotives as cargo moves between Germany, Austria, Switzerland, Italy, and the Netherlands. This will improve the efficiency of freight transport throughout Europe, as well as reduce transit times.

While the world has focused on why the BRI is failing, there is also a failure to appreciate the Chinese approach to strategy, guided by the philosopher Sun Tzu’s Art of War. Central to this approach is the creation of distractions and allowing others to think you are weak so as subdue an enemy without fighting. China’s MOUs with Italy and Switzerland are a testament to this strategy, just as the BRI itself is part of a 100-year plan to restore Chinese pride.

Despite publicly indicating a preference for the Port of Trieste, China may have really been working on securing market entry into Europe via the Rhine-Alpine corridor. This would suggest that the Swiss and Italian MOUs were not coincidental, but carefully coordinated and planned.

Andre Wheeler is director of Wheeler Management Consulting, Australia. Contact him at andre@wheelermanagement.com.au.