Italy and Russia, the link is increasingly close
Giovanna De Maio 11 March 2019

It has been more than four years since the annexation of Crimea, but the trust between Russia and the West has not yet been restored. The stalemate in Donbass, Russia’s military intervention in Syria, its alleged influence in the American and European elections, and the seizure of three Ukrainian vessels are some of the main tensions that have come to center on Moscow as it negotiates the international scene.

This context has proved to be particularly unfavourable for economic relations between Italy and Russia. The total value of trade exchanged between the two countries fell by some 3 billion euros in the four years after 2013, ostensibly because trade relations between the two countries are particularly sensitive to Western sanctions on Russia and Russia’s counter-sanctions.

Consistent with the approach it has adopted since the end of WWII, Italy tried to mediate between Russia and the West, preferring to address these factors of crisis cooperatively, rather than through confrontation. And, indeed, there are a set of economic and political factors at the base of the historical friendship between Italy and Russia that are worth exploring.

 

Business and energy ties

 

The economic synergy between Italy and Russia is based on the strong complementarity of their respective economies: while Italy is a leader in the manufacturing sector, Russia is a prominent exporter of hydrocarbons. Since Soviet times—but especially after 1991—Italy and Russia have consolidated their expanded their business ties from the automotive and energy sectors to those of machinery, textiles, furniture, and pharmaceutical products. At the moment, more than 400 Italian enterprises operate in Russia, along with eight banks, and a handful of law firms.

According to the data provided by Coldiretti (Italian Farmers’ Association), sanctions against Russia, and Russia’s counter-sanctions have had a negative impact on the Italian economy, especially in the agricultural sector (which registered a decline of 50% in exports to Russia over four years). At the same time, the small, and medium enterprises in the north-east regions of Italy experienced the biggest losses. In addition, the decrease in oil prices over the period saw the value of the Russian ruble decline sharply, producing a contraction in Russians’ purchasing power and demand for imported goods.

Nevertheless, since 2017, trade exchange between Italy and Russia has grown again (from 27 to 36 billion euros) and Italy’s agri-food exports increased significantly. Italian companies started exporting to Russia through Serbia or Belorussia (which are not subject to sanctions) or even delocalized their production to Russia. All of this contributed to recoup – even though not fully – the losses experienced in the first two years of the sanctions regime. Moreover, Italian companies sealed a number of agreements with their Russian counterparts, especially in the field of electric energy, technological development, and research.

As far as energy ties are concerned, Russia is Italy’s first supplier of natural gas (and the fourth for oil) covering around 43% of Italy’s energy supplies. In this regard, Italy is interested in realizing the potential of the southern corridor for Russian gas through construction of a pipeline linking EU territory to the Turkish Stream pipeline (pumping Russian gas into Turkey) and avoiding the closing of the Ukrainian gas route. These actions became particularly necessary following the European Commission’s rejection of the project of the South Stream pipeline (that would have linked Russia to the EU through the Black Sea) and the challenges posed by the Nord Stream 2 project that provides competitive advantages to Germany.

 

Political ties

 

The absence of historical clashes between Italy and Russia (then Soviet Union), along with strong economic, and energy interests, has underpinned strong political ties between the two countries, facilitated as well by the cultural bridge provided by the Italian Communist party (the largest in the Western block during the Cold War).

As the Soviet Union collapsed, Italy openly promoted Russia’s rapprochement to the Euro-Atlantic community in the framework of a strategy widely shared by a variety of the Italian political forces. In this regard, Italy strongly supported the creation of the NATO–Russia Council in 2002, whose foundation act was signed in Italy under the initiative of the then-prime minister Silvio Berlusconi (Pratica di Mare).

While supporting these initiatives, Italy showed some skepticism on NATO enlargement and to the EU Eastern Partnership targeted toward the post-soviet countries. When the crisis in Ukraine broke out, Italy put in place a double-track policy. On the one hand, Italy condemned Russia for the annexation of Crimea and for fueling the rebellion in Donbass, and also participated in NATO reassurance measures (Readiness Action Plan) through the deployment of troops in multinational battlegroups in Poland and Baltic States.

On the other hand, Italy sought renewal of the sanctions on Russia in compliance with the Minsk Agreements and requested that the Organization for Security and Cooperation in Europe (OSCE) would monitor the cease-fire. Besides, Italy insisted that the NATO battle units to be deployed on a temporary basis rather than permanently and opposed the idea of sending weapons to Ukraine in order to prevent the conflict from escalating. Italy also supported confidence building measures both within the OSCE (during its chairmanship in 2018) and the reactivation of the NATO–Russia council (whose activity was suspended after the annexation of Crimea).

At the same time, Italian politicians never ceased to entertain relations with Moscow even in the occasions in which other Western leaders did not participate (Soči winter Olympic games, Saint Petersburg Economic forum in 2016, just to name a couple of examples).

Recent visits by the Italian foreign and interior ministers—and the prime minister—to Russia testify to the importance the current government places on Russia as a partner both in the economic and also in the political sphere. One of the topics of these meetings, in fact, was the stabilization of Libya and that Italy considers crucial for its economic and security interests as it is the main departure points of the migration flows in the Mediterranean. In this context, Italy is interested that Russia keep supporting the United Nations stabilization plan for Libya in the UN Security Council.

At the same time, the approach of the Italian government toward Moscow in the current international scenario is not free from criticism. During the 2018 electoral campaign, the leaders of Five Star Movement and the League frequently traveled to Moscow and praised its sovereigntist approach to international relations—framing this in a broader context of criticism toward the EU.

In the coalition agreement to the two forces forged, one point is dedicated to the goal of lifting the sanctions on Russia. Although at the moment there are no significant initiatives in this regard (the Italian government has not opposed the renewal of the sanctions and did not submit any proposal of lifting them to the European Council) it is also true that such an approach shows ambiguity and does not benefit either European unity or Italy’s credibility as a reliable international partner for Western allies.

 

Photo: Sergei CHIRIKOV / POOL / AFP


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