In a rare intervention, Italy has blocked the Chinese state-owned Sinochem from taking control of the tyre-making giant Pirelli. Since 2015, Sinochem, a prominent chemical company from China, has held the largest share of ownership in Pirelli, making it the primary investor with a 37 per cent stake. The recent revelation comes following Sinochem’s communication with the Italian government this year, where they discussed their intention to renew and update their current shareholder agreement. The decision arose from the Italian Government’s measures to protect the independence of the 151-year-old Milan-based firm from Chinese domination.
Italy’s measures to protect strategic assets
Italy’s right-wing administration under Prime Minister Georgia Meloni has examined the agreement between Sinochem and the other investor Camfin, the financial holding of Pirellis CEO Marco Tronchetti Provera under the “Golden Power Procedure” rules.
The rule aims to protect assets deemed of strategic importance for Italy. The statement given by the Italian Prime Minister’s office on Friday said the evasive measures on Pirelli were “aimed at creating a network of measures to safeguard Pirelli’s independence and its management”.
The measure has also resulted from Italy’s concern over the possibility of Beijing getting control of sensitive technologies used by Pirelli. The government has identified that the sensors implanted in the Pirelli tires can create “complex digital models that can be used in cutting-edge systems such as smart cities and digital twins” when combined with AI. Therefore this technology emerged as a “critical technology of national strategic importance”, which made Italy impose measures to restrict access to China to any strategic information that could threaten the formers national security.
Future of Pirelli
Italian government’s measures have made Pirelli free from Chinese state dominance in its decision-making capacity to a great extent. As stated in Pirelli’s press release issued on Sunday, the actions undertaken aim to achieve the following objectives:
- Secure Pirelli’s complete independence in managing its interactions with clients and suppliers.
- Ensure that Pirelli has the freedom to independently devise strategic, industrial, and financial plans, as well as budgets for both the Company and the Group.
- Safeguard Pirelli from receiving directives or instructions from the Sinochem Group.
The government order also strips Sinochem of the power to designate the chief executive of Pirelli despite being the main shareholder. The decision from Rome states that the exclusive authority to propose candidates for the CEO position at Pirelli lies with Camfin, the owner of a 14 per cent stake in the company.
Italy to pull out of BRI
In 2019 Italy became the only G7 nation to join China’s flagship Belt and Road Initiative (BRI). However, it is highly improbable that the current right-wing government of Italy, led by Prime Minister Giorgia Meloni since 2022, will extend the BRI (Belt and Road Initiative) agreement with China, as it is set to expire in 2024. Therefore the government intervention to protect the legacy of the Italian brand Pirelli from Chinese influence should be seen as a first step for Italy to withdraw from the BRI gradually.
Image Source: Reuters
Michele Geraci, the former Undersecretary of State at the Italian Ministry of Economic Development and a significant figure in Italy’s involvement with the Belt and Road Initiative (BRI) has voiced criticism against Giorgia Meloni’s choice, claiming it reflects a desire to position Italy as anti-China, pro-US, and pro-NATO. Geraci argues that such a decision would not only have negative implications for China but also send an unfavourable message to other foreign investors.
The measures also come amid US Secretary of State Antony Blinken’s visit to China at a time when the relationship between a majority of the Western nations with China is at its lowest.
