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SECRET SECTION 01 of 05 ROME 000097

NOFORN
SIPDIS

DEPT FOR INR/I

E.O. 12958: DECL: 01/19/2019
TAGS: PREL PGOV ENRG EPET RS IT
SUBJECT: ITALY-RUSSIA RELATIONS: THE VIEW FROM ROME
(C-RE8-02675)

REF: a) 08 STATE 134386 b) ROME 451

CLASSIFIED BY: Ronald P. Spogli, Ambassador, for reasons 1.4 (b), (d).

¶1. (U) This is a joint Political and Economic Section cable.

¶2. (C/NF) Summary. Italy's relationship with Russia is
complex, encompassing historical ideological sympathies,
geostrategic calculations, commercial pressure, energy
dependence, and personal relationships between top leaders.
The combination of these factors creates a strong tendency
for Italy's foreign policy to be highly receptive to Russian
efforts to gain greater political influence in the EU and
to support Russia's efforts to dilute American security
interests in Europe. In its relationship with Russia, energy
is the most important bilateral issue and the quest for
stable energy supplies from Russia frequently forces
Italy to compromise on security and political issues.
A not insignificant concomitant factor is PM
Berlusconi's desire to be seen as an important
European player on foreign policy, leading him to
go where others dare not. End summary.

Roots of Italian Russophilia: Ideology on the Left, a
Long-Standing Market Opportunity on the Right
- - - - - - - - - - - - - - - - - - - - - - - - - -

¶3. (C/NF) Until the 2008 parliamentary elections, the Italian
Communist party and various leftist splinter groups were a
permanent fixture of the Italian political scene. Throughout the Cold
War members of the Italian communist movement maintained close
ties with the Soviet Union, other communist countries, and many
communist revolutionary movements. Unlike many other communist parties
around the world, the Italian communist movement remained
unapologetic in its continued belief in Marxism-Leninism as a viable
economic alternative to capitalism. While many European leftist
intellectuals recognize that -- aside from an authoritarian approach to
governing - - Putin's Russia bears little resemblance to Communist
ideals, this fact has not deterred Italian communists and other radical
left politicians from being openly pro-Russia on the basis of
ideological solidarity. This, combined with the advanced average age o
most high-level Italian politicians (65-70), prevents many in the
far left of Italy's political spectrum from moving beyond a worldview
developed (and apparently frozen) during the Cold War.

¶4. (C/NF) Throughout the Cold War, Italian business interests
frequently skirted the line of what was appropriate in their
pursuit of the Soviet market. After the collapse of the Soviet
Union, the explosion of consumer wealth in Russia created massive deman
for high-end and luxury Italian exports. From 1998 to 2007
Italian exports to Russia grew by 230 percent, from 2.7 billion Euros
to 9.5 Billion. Many of Italy's leading businessmen began to see
Russia as a limitless market that could substitute for loss of export
revenue from other parts of the world. These businessmen maintain
strong ties to the pro-business, free-market-oriented politicians on
the right, including the most visible patron of Italy's business
elite: PM Silvio Berlusconi.

Putin Most Influential Figure in Italy's Russia Policy
- - - - - - - - - - - - - - - - - - - - -- - - - - - -

¶5. (C/NF) While Italy's political parties, the MFA and ENI
exert some influence on Italy's Russia policy, by far the most importan
factor is the personal attention Putin devotes to the relationship.
By our reckoning, Putin has held more bilateral meetings with
sitting Italian PMs in the recent past than any other world leader.
He was the first world leader to meet with Berlusconi after the 2008
elections, arriving in Sardegna to visit the PM designate
before the latter had even been sworn in. Berlusconi believes that
Putin is his close and personal friend and continues to have more
contact with Putin than with any other world leader. During the Georgi
crisis, Berlusconi spoke to Putin on a daily basis for a period of
almost a week. The basis of the friendship is hard to determine, but
many interlocutors have told us that Berlusconi believes that
Putin, a fellow 'tycoon', trusts Berlusconi more than other European
leader. (A contact in the PM's office told us that their frequent
meetings are accompanied by exchanges of lavish gifts). Berlusconi
admires Putin's macho, decisive, and authoritarian governing style,
which the Italian PM believes matches his own. From the Russian side,
it appears that Putin has devoted much energy to developing
Berlusconi's trust.

¶6. (S/NF) Contacts in both the opposition center-left PD

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party and Berlusconi's own PdL party, however, have hinted at a more
nefarious connection. They believe that Berlusconi and his cronies are
profiting personally and handsomely from many of the energy
deals between Italy and Russia. The Georgian ambassador in Rome
has told us that the GOG believes Putin has promised Berlusconi a
percentage of profits from any pipelines developed by Gazprom in
coordination with ENI. Whenever we raise the issue of Russia and the P
with our contacts in PdL, Berlusconi's own party, they have usually
pointed us to Valentino Valentini, a member of parliament and somewhat
shadowy figure who operates as Berluscon's key man on Russia, albeit
with no staff or even a secretary. Valentini, a Russian-speaker who
travels to Russia several times per month, frequently appears at
Berlusconi's side when he meets other world leaders. What he does in
Moscow during his frequent visits is unclear but he is widely
rumored to be looking after Berlusconi's business interests in Russia.
Our contacts uniformly deem Valentini, a multilingual former
interpreter, close to Berlusconi with regard to Russia, but not a polic
person.

¶7. (C/NF) All of our interlocutors - xxxxxxxxxxxx - report that Berlusconi determines
Italy's policy on Russia single-handedly, neither seeking nor
accepting counsel. Virtually all are reluctant to confront the PM even
when he is at his worst on Russia. In November 2008, after a
disastrous press conference in which, inter alia, the PM described NATO
expansion, recognition of Kosovo's independence, and missile
defense as "U.S. provocations" of Russia, GOI officials did a classic
duck- and-cover. In response to our objections, MFA and PM staff
sheepishly directed us to the PM himself, rather than deliver
the unpleasant news to him that he had angered not only the
Americans but other members of the Contact Group for the Balkans, not t
mention the Czechs and Poles. Even FM Frattini admits to wielding no
influence on Berlusconi on Russia. During an early September
visit to Italy, former VP Cheney confronted Frattini on Italy's
very public and unhelpful stance on the Georgia conflict. A subdued
Frattini noted that, while he had strong opinions on the issue, he
nevertheless received his marching orders from the PM.

¶8. (C/NF) Distressingly, Berlusconi treats Russia policy as
he does his domestic political affairs - tactically and day-to-day.
His overwhelming desire is to remain in Putin's good graces, and
he has frequently voiced opinions and declarations that have been
passed to him directly by Putin. One such example: in the aftermath of
the Georgia crisis, Berlusconi began (and continues) to insist
that Georgia was the aggressor and that the GOG was responsible
for several hundred civilian deaths in South Ossetia.

No Institutional Leadership on Russia
- - - - - - - - - - - - - - - - - - -

¶9. (C/NF) Trying to determine who might have some influence
on Berlusconi's Russia policy is not an easy task. One thing is
certain, however - it is not the foreign policy institutions
of the GOI. FM Frattini is widely seen as only the messenger for PM
Berlusconi's Russia policy - indeed he termed himself as much
to VP Cheney during the latter's September 2008 visit to Rome.
Within the professional ranks, resources and expertise are scant.
Italy's MFA contains only one full-time diplomat assigned to cover
Russia and the countries of the former Soviet Union: the Office
Director. The Deputy Office Director position and single Desk Officer
position assigned to cover all the countries of the FSU are vacant.
Italy's dire budget situation is likely to prevent the hiring of
additional staff at the MFA for at least two years, according to one MF
source. The Office Director's direct supervisor - the A/S equivalent
- is also responsible for the Balkans and the rest of Europe, but
she, like Frattini, appears to have little or no input to GOI
Russia policy. The PM's staff does not fare much better. The
Office of the Diplomatic Advisor is thinly staffed - with only one
officer assigned to each geographic region. The position covering
Russia is staffed by a midlevel diplomat who is in the process of being
transferred. No replacement is likely to be named. As a result, the
officer covering the Middle East (also the deputy for the office)
will be forced to take on those duties in addition to his already
overwhelming portfolio and management duties.

¶10. (C/NF) In 2008 the MFA undertook an effort to produce a
long-term foreign policy strategy for the GOI. In a paper entitled
"Rapporto 2020" the MFA outlined its strategic vision for the next
decade and a half. The document notes that geostrategic realities have
created the need for Italy to adapt its foreign policy with regard to
Russia and calls for Italy to seek 'a privileged relationship' with
Moscow in order to press its overwhelmingly preeminent bilateral
concern: energy.

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Energy Becomes Key Bilateral Issue
- - - - - - - - - - - - - - - - - -

¶11. (C/NF) With virtually no domestic energy reserves, no
domestic nuclear power, and an ambitious parastatal energy company,
Italy's key bilateral concern with Russia has become the quest for
long-term guarantees of energy supplies. The GOI has supported ENI and
other energy giants' efforts to create a unique partnership with
Russia and Gazprom for long-term cooperation. ENI, Italy's most
prominent energy parastatal, wields immense political power; its
business strategy has focused on complicated geopolitical environments
generally perceived as overly risky by many of its international
competitors. ENI's lobbying efforts vis-(-vis the GOI are better
funded than most government offices. It hosts one diplomatic
advisor assigned from the MFA. Going by press reports alone, we
would judge that PM Berlusconi grants its director, Paolo Scaroni, as
much access as he does his own FM.xxxxxxxxxxxx. Members of political
parties on both sides of the aisle have told us that ENI is
one of the leading financial contributors to Italy's many
think-tanks - many of which produce public diplomacy discussions and
events on the importance of Italy-Russia relations. At one such event
in 2007, a conference on Central Asia, representatives from ENI and
Edison were given 30 minutes each to speak, while the four Foreign
Ministers and Deputy Foreign Minister of five Central Asian former
Soviet states were all crammed into a single hour. There is even
suspicion that ENI maintains journalists on its payroll.

¶12. (C/NF) Members of political parties from both sides of
the aisle have told us that ENI does not limit its dialogue with the
government to energy issues. One member of the opposition center-left
PD party told poloffs that ENI's presence in Russia exceeds that of
Italy's understaffed embassy. While it is unclear how much policy
coordination occurs between ENI and the Russian political
structure, the same PD party members noted that ENI had as much contact
with Russian political and economic leaders as the embassy, if not
more, and political messages were frequently passed through such
commercial/economic channels. Back in Rome, ENI maintains
strong contacts with members of the Italian parliament - something
the MFA does not do (apart from requested briefings to members of the
foreign affairs committees).

An Energy Policy without the Policy
- - - - - - - - - - - - - - - - - -

¶13. (C/NF) ENI and other energy giants have managed to press
their case quite effectively within the highest ranks of the GOI.
Italian leaders on both sides of the aisle seem strangely unconcerned
about dependence on Russian energy. They point out that Italy
depended on Russian coal during the darkest days of the Cold War with n
dire consequence. Italians are also lulled into complacency by
the fact that geographic proximity to North African resources means
that they are far less dependent on Russia than are the Germans or the
former Eastern bloc countries.

¶14. (C/NF) During a March 2008 visit to ENI Headquarters
embassy staff were given a briefing on ENI's Russian energy
operations (available on Embassy Rome's Classified web site). ENI's
view of the European energy situation was disturbingly similar to that
of GAZPROM and the Kremlin, and at times laced with rhetorical
flourishes reminiscent of Soviet-era double-speak: according to ENI,
the real threat to Western Europe's energy security is not Russia --
it is Ukraine. The real solution to Europe's energy insecurity,
according to ENI, lies in more direct pipeline connections to Russian
gas fields and a need for pipelines that do not go through
Ukraine - the rationale for the South Stream and Nord Stream pipelines
(ref b).
ENI's engineering arm hopes to construct both pipelines using
experience gained in the construction of the Blue Stream
pipeline that connects Russia and Turkey under the Eastern portion of
the Black Sea. Additionally, ENI seeks full partnership with
Russia on the South Stream project. GOI and ENI contacts have reported
that the company was having trouble getting a firm Russian
commitment to this South Stream partnership. The plummeting price of
hydrocarbons may have reduced the economic incentives for this project,
but many analysts believe that Russian geo-strategic concerns will
trump business considerations on this project. The most recent
Russia- Ukraine gas dispute seems to have revived interest in the
Nord Stream and South Stream projects, especially among those who see
Ukraine as the problem.


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¶15. (C/NF) Italy is not totally blind to the dangers of its
dependence on Russia, however, and it is taking some steps
that may prevent an increase in the percentage of their energy that
they get from Russia. Upon returning to power, Berlusconi announced
that he would return the country to nuclear power. While the GOI
seems serious, this project will require eye-popping expenditures,
long- term commitment, and the resolution of thorny environmental
problems. Some fear that the nuclear project was launched in response
to an oil price of $140 per barrel, and wonder if the Italian
commitment to nuclear power will recede if oil prices stay low. Italy
is also increasing its use of Liquid Natural Gas and is finishing
work on a new terminal in the Northern Adriatic. While
less-than-enthusiastic about the EU's complex Nabucco pipeline, the GOI
seems to be supporting the smaller-scale Turkey-Greece-Italy pipeline
project designed to bring Caspian gas to Western Europe. Edison, a
French company with Italian roots, is trying to determine if it
should commit to this project. While Azeri gas supplies and
Turkey's willingness to allow the gas to flow West are unresolved
issues, Edison believes its project has a chance of succeeding
because unlike Nabucco, it is small enough -- it believes -- not to
provoke opposition from Russia. The GOI -- especially powerful
Minister for Economic Development Scajola -- supports the TGI project
(in fact GOI officials complain if the U.S. sometimes seems to imply
that Nabucco should have priority). There is fear that a successful
launch of South Stream would -- by promising to meet demand -- doom
both South Stream and Nabucco.

A Foreign Policy Designed to Deny Russia Nothing
- - - - - - - - - - - - - - - - - - - - - - - -

¶16. (C/NF) The combination of historical ideological
sympathy, energy dependence, lack of institutional influence, and a
close personal relationship between Berlusconi and Putin serve to
provide Russia with an apparently trusted ally, overtly willing to work
overtime within the EU on Moscow's behalf. Russia can count on Italy
to support its efforts to remove irritants in its relations with
the West, including:

- pressure on/within OSCE to overlook Russia's lack of
compliance with its legally binding Istanbul commitments on frozen
conflicts,
- weak support or even opposition to NATO efforts to build
closer ties to Georgia and Ukraine,
- weak initial support for international efforts to recognize
Kosovo's independence,
- unhelpful comments on U.S. bilateral Missile Defense plans
with Poland and Czech Republic,
- support for Russian President Medvedev's plans to redefine
European security architecture to undermine OSCE and NATO.
- support for Russian efforts to undermine EU and US energy
security initiatives for Europe.

¶17. (C/NF) In the past, Berlusconi's highly-prized personal
relationship with U.S. President Bush was an important
counterweight to Russian influence, but many pro-U.S. Italian party
officials on both sides of the aisle have worried to us that Bush's
departure could tempt Berlusconi to move closer to Russia. For his
part, Berlusconi has publicly stated that he would like to become a
bridge between the U.S. and Russia and to "educate a young and
inexperienced new American president" on how to deal with the Russians.
If the past is any guide, this will likely mean an intensified
effort to press the Russian agenda with the U.S.

Mitigating the Problem: Pushing Back on a Corrosive Influence
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

¶18. (C/NF) To tackle the problem head-on, Post has deployed
a robust diplomatic and public affairs strategy targeting key figures
inside and outside government. Our aim is two-fold: educate our
interlocutors more profoundly on Russian activities and thus
the context for U.S. policy, as well as build a counter- weight
of dissenting opinion on Russia policy, especially within
Berlusconi's political party. . Since the beginning of the summer, wit
Berlusconi's return to power and the Georgia crisis, we have
been engaging with GOI leaders aggressively at all levels. Pol,
PA and Econoffs have engaged party members, GOI contacts, think
tanks and even press to provide an alternative narrative to the
Berlusconi insistence that Russia is a democratic and stable country
that has been provoked by the West. The effort seems to be paying
off. The opposition has begun taking jabs at Berlusconi by portraying
him as choosing the wrong side of the debate. Some in the PdL have
begun to approach us privately to say that they would like greater
dialogue with us on the Russia issue, and have indicated their

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interest in challenging Berlusconi's giddiness about Putin. While we
have a long way to go in changing the narrative, unfortunately, we have
help - in the form of a PM who appears increasingly to be the
mouthpiece of Putin.

Comment
- - - -

¶19. (C/NF) The bilateral relationship between the U.S. and
Italy is excellent and encompasses tremendous cooperation
on many levels and on many fronts.
Unfortunately, Berlusconi efforts to "repair" the relationship
between the West and Russia (which as he told the Ambassador in their
farewell meeting on February 23, "sticks in my gut as a large
undigested mass") are threatening his credibility and
becoming a real irritant in our relationship. We can help
get him back on the right track by sending him a clear signal
that the U.S. does not need an interlocutor for its important bilateral
relationship with Russia and that his insistence on undermining existin
structures and channels based on common interests and shared values
within the alliance in exchange for short term stability is not a
strategy Washington wishes to pursue.

Spogli