Introduction

Italy has approved measures to restrict the shareholding rights of Chinese chemicals group Sinochem in Pirelli, the Milan-listed tire maker. This intervention is seen as a rare move in an eight-year-old Chinese investment that was not previously considered a national strategic asset. In 2015, a former Chinese state-owned chemical group acquired a majority stake in Pirelli for $7.7 billion.

Prime Minister’s Office Statement

The office of Prime Minister Giorgia Meloni issued a statement on Friday, explaining that the measures were adopted as part of the country’s “golden power” foreign investment screening mechanism. The aim of these measures is to safeguard the independence of Pirelli and its management. The Italian government considers these actions necessary to protect the company from the increased control exerted by the Chinese government over business and governance decisions.

Pirelli CEO’s Concerns

According to a report by Flight, Pirelli chief executive Marco Tronchetti Provera had pressed the government to intervene in the company’s shareholding deals. He raised concerns about the growing control the Chinese government was exercising over Pirelli’s operations. Tronchetti Provera, who holds a minority stake in the company, has been embroiled in disputes with its Chinese partners regarding day-to-day management. He had also tried, albeit unsuccessfully, to convince them to sell part of their stake. Friction within the company also arose over Tronchetti Provera’s salary, which amounted to 20.5 million euros in 2022.

Restrictions Imposed by Rome

The restrictions imposed by Rome include limitations on access to and sharing of information between Pirelli and Sinochem. Additionally, certain “strategic” board decisions will require a four-fifths majority. These measures aim to protect strategically relevant information and the company’s know-how. Prime Minister Meloni’s office emphasizes the need to safeguard Pirelli’s independence and national interests.

Italy’s Shifting Foreign Policy

Italy is currently navigating a delicate balancing act as it aligns itself more closely with the European Union and the United States on foreign policy while reassessing its relationship with China. The government is even considering withdrawing from China’s flagship overseas investment project, the Belt and Road Initiative. Italy was the only European country to join this initiative in 2019.

International Concerns about China

Leaders from the United States, European Union, and Japan have shown increasing concerns about China and the need to “de-risk” its influence. They highlight the importance of protecting advanced technologies that could be exploited to threaten national security. Italy and the EU have expanded the definition of important national security assets since 2019. Consequently, the number of requests filed under the Italian screening mechanism has significantly increased, reaching 496 in 2021 from just 8 in 2014.

Technological Importance of Pirelli

Prime Minister Meloni’s office specifically identifies technology enabling geolocation and the collection of driver information via a microchip fitted to tires as critical and of national strategic importance. Misuse of such technology poses risks to customers and national security.

Summary

Italy has implemented measures to restrict Chinese chemicals group Sinochem’s shareholding rights in Pirelli, a move aimed at safeguarding the independence and national interests of the Milan-listed tire maker. The Italian government’s intervention comes after concerns were raised by Pirelli’s CEO about the increasing control exerted by the Chinese government over the company’s operations. Rome has imposed restrictions on information sharing and certain board decisions to protect strategically relevant information and company know-how. These actions reflect Italy’s efforts to align itself with the EU and the US on foreign policy matters while reevaluating its relationship with China. International concerns about China’s influence have led to an expansion in the definition of important national security assets in Italy and the EU. Pirelli’s technology enabling geolocation and driver information collection via a microchip is deemed critical and of national strategic importance. The misuse of such technology can pose risks to customers and national security. Italy’s measures to limit Sinochem’s shareholding in Pirelli form part of a broader trend of countries seeking to protect their national security interests in the face of increased Chinese investments and influence.

Expanding Perspectives on Italy’s Actions

Italy’s decision to restrict Sinochem’s shareholding rights in Pirelli raises important questions about the evolving dynamics between China and other nations. This move is indicative of a broader trend of countries reevaluating their economic ties with China and aiming to safeguard their national security interests. Some key points to consider when examining Italy’s actions include:

1. The growing concerns among Western countries about China’s influence and its potential impact on national security.
2. The shift towards stricter foreign investment screening mechanisms, as evidenced by the increase in requests filed under Italy’s screening mechanism.
3. The complexity of balancing economic interests with national security considerations, especially in the case of investments in sectors deemed strategically important.
4. The role of advanced technologies in shaping the national security landscape, with geolocation and data collection technologies being recognized as critical.
5. The need for international coordination and cooperation to address common concerns about China’s expanding influence and its potential risks.

Italy’s decision echoes similar actions taken by other countries, such as the United States, which has implemented measures to protect critical technologies and intellectual property from being exploited by foreign entities. It also reflects a broader reassessment of the Belt and Road Initiative, with Italy considering withdrawing from the project. These developments may have implications not only for Italy’s relationship with China but also for the broader geopolitical landscape.

As countries navigate their economic and security interests in the context of an increasingly interconnected world, it becomes imperative to strike a balance between engagement and safeguarding national security. Italy’s measures to limit Sinochem’s shareholding in Pirelli serve as a reminder of the complexities involved in managing the risks and benefits of foreign investments, particularly in strategically important sectors. The evolving dynamics between China and other nations will continue to shape the global economic and political landscape, making it crucial for countries to carefully assess the implications of their actions.

Conclusion

Italy’s move to restrict Chinese chemicals group Sinochem’s shareholding rights in Pirelli reflects the country’s efforts to safeguard national security and protect strategically important assets. This decision comes amidst a broader global trend of countries reassessing their economic ties with China and implementing measures to address concerns about China’s influence. Italy’s restrictions on Sinochem’s ownership in Pirelli highlight the importance of striking a balance between economic engagement and safeguarding national security interests. As the dynamics between China and other nations continue to evolve, it is crucial for countries to carefully assess the implications of their actions on both domestic and international fronts.

Summary:

Italy has implemented measures to limit Chinese chemicals group Sinochem’s shareholding rights in Pirelli, a Milan-listed tire maker, to safeguard the company’s independence and protect national interests. Concerns raised by Pirelli’s CEO about China’s increasing control over the company’s operations led to Rome’s intervention. The restrictions include limitations on information sharing and certain board decisions. Italy’s actions reflect its attempt to align with the EU and the US on foreign policy while reassessing its relationship with China. International concerns about China’s influence and national security risks have led to an expansion of what is considered important national security assets in Italy and the EU. Italy recognizes the technological importance of Pirelli, particularly the geolocation and driver information collection technology it possesses. The misuse of such technology can pose risks to customers and national security. Italy’s move to limit Sinochem’s shareholding in Pirelli is part of a broader trend among countries seeking to protect their national security interests in the face of increased Chinese investments and influence.