(Bloomberg) -- The head of Italy’s industry lobby, Carlo Bonomi, traveled to Kiyv recently to demonstrate the business community’s support for Ukraine in the face of Russian aggression.
Even as he pledged to help rebuild the war-ravaged country, back home in Italy, Prime Minister Mario Draghi’s coalition was buffeted by a dispute over sending military aid for Ukraine.
Draghi’s government survived, but the turmoil in Rome showed how President Vladimir Putin’s invasion is exposing a fissure over attitudes to Russia that runs through Italian business, politics and society at large. With the war now in its fifth month and no end in sight, those tensions threaten to bubble up again and muddy Italy’s response, undermining European efforts to punish Moscow and to aid Kyiv.
“Italy has always been, if not the friendliest country for Russia in western Europe, then the most sympathetic,” said Elena Maslova, senior research fellow at the Institute of Europe of the Russian Academy of Sciences. “Italian entrepreneurs are famous for their flexibility and inventiveness in dealing with Russia,” she added. But now “it could get much more difficult for them.”
A person familiar with Italian government thinking on Russia said that relations will survive. There are contacts on a personal level between Italian and Russian officials, and business doesn’t want to leave the country, the person said, asking not to be named due to the economic and political sensitivity of the matter.
That’s not the message Draghi took to Kyiv this month, when he made a show of his determination to cut business and energy ties with Moscow. Yet polling suggests the Italian public is less than wholehearted in its support.
Italians are the least likely to blame Russia for the war, a survey of some 8,000 people in 10 European nations for the European Council on Foreign Relations found this month. They are the most in favor of finding a quick peace regardless of whether it means territorial losses for Ukraine, and display the greatest opposition to Ukraine’s accession to the European Union.
Italy has suffered as big an economic hit from the war’s fallout as anyone in western Europe, as the government tries to replace the 40% of its gas that was sourced from Russia. Italian bond yields have surged as the global outlook worsens and the European Central Bank prepares to increase rates, raising the cost of servicing its debt more than euro-area peers.
While polls show most Europeans are worried about the economic impact of the war, there’s a sense of ambivalence toward Ukraine in Italy that’s compounded by some inconsistent attitudes among businesses.
As recently as January, when Russia’s military buildup along Ukraine’s border was clear, Italian executives shrugged off an appeal from the government in Rome and held a conference call with Putin on investment prospects. The head of the Russian branch of Bonomi’s Confindustria lobby was one of the few western Europeans at the St. Petersburg forum earlier this month.
At the war’s outbreak in late February, Italy was cautious about pursuing a tough response, fearing for its commercial ties. Italy’s overall trade links with Russia rose to some $33 billion last year from less than $20 billion in 2016.
As Bonomi was in Kyiv, Ukraine’s Defense Ministry called out Italian-based metals company Danieli, alleging in a tweet that it “still collaborates with Russian plants” and supplies equipment to produce nuclear submarines and tank armor.
Danieli rejected that accusation in a statement, saying that the group does not in any way provide for the direct production of war materials and is in full compliance with EU sanctions.
Under the government’s guidance, state-owned companies have performed a dramatic U-turn on Russia.
Enel SpA sold its entire stake in its Russian unit this month, a dramatic reversal for the Italian utility which had been betting heavily on Russia before the invasion. Eni SpA, which established energy relations with Moscow back in the Soviet era, has meanwhile worked with the Italian government to support its diversification of energy sources, signing new deals in Algeria, Angola and Qatar.
Russia doesn’t think it’s lost Italy completely, according to a government official in Moscow who cited lots of contacts with Italian officials and businessmen, asking not be named discussing sensitive international relations. Privately, they say they don’t support the EU’s policy against Russia and oppose sanctions, but can’t do anything about it, the official said.
That affinity for Russia was on display in Rome this week as the Five Star Movement split over Ukraine, throwing Draghi’s government into turmoil. Foreign Minister Luigi Di Maio quit Five Star citing its skeptical stance to helping Ukraine after party leader Giuseppe Conte opposed sending weapons to Kyiv.
Conte, who served as prime minster in Italy’s previous government, is seeking to carve out a stronger profile ahead of national elections next year — by trying to exploit opposition to military aid among voters.
Such a position might be untenable in many European countries; not in Italy, where about half of respondents to an Ipsos poll published June 20 said they were against sending more weapons to Ukraine.
Five Star isn’t the only party seeking to appeal to Italy’s divided loyalties. Matteo Salvini, leader of the League, announced a trip to Moscow this month, then had to cancel due to opposition from his own party and the ruling coalition. The Russian embassy said it had paid for Salvini’s flight.
“For many years, Russia has had a very comprehensive and diverse network of supporters across Italy,” said Francesco Galietti, founder of Rome-based Political risk consultancy Policy Sonar. “This network will not be swept away overnight, but showing support for Moscow has become increasingly complicated.”
The roots of Italy’s Russophilia lie in a shared past. For decades during the Cold War, Italy boasted the biggest communist party in western Europe. In 1964, the Russian city of Stavropol on the Volga River was renamed “Tolyatti,” in honor of Palmiro Togliatti, leader of the Italian Communist Party.
More recently, former Prime Minister Silvio Berlusconi forged a close personal friendship with Putin, and visited Crimea with the Russia leader the year after its 2014 annexation by Russia.
Today, public opinion is influenced by the constant presence of pro-Russia hosts on popular TV shows.
For Galietti of Policy Sonar, Draghi has been a key factor in steering Italy away from Moscow, with the effect that “Russia’s friends will have to lie low for the foreseeable future.”
Still, the Italian government’s position is different to that of business, according to Vittorio Torrembini, vice president of the Association of Italian Entrepreneurs in Russia, known as GIM-Unimpresa. He said most Italian companies there are staying put.
Exports to Russia still plunged 50% in the past four months, and Italian business people are under pressure as a result of “over-compliance” with sanctions rules, Torrembini said.
Before the invasion “we were heroes,” he said. “Now we are outcasts.”
©2022 Bloomberg L.P.
BNN Bloomberg Picks
Rhine River gets too shallow in another crisis for European energy
How rising rates are making GICs more attractive for investors
Eric Nuttall's Top Picks: August 12, 2022
Mastercard faces retailer backlash over instalment payments
What to know about insurance in 'summer of travel hell'
Rubik's cube is going digital as Spin Master buys out game studio