MILAN — One hundred years have passed since Italy invaded the provinces of Libya to liberate them from the Ottomans and install colonial rule in Italian North Africa. Now, with NATO aircraft flying daily from Italian bases to pound targets controlled by the regime of Col. Muammar el-Qaddafi, Italy’s longstanding post-colonial business ties risk taking a hit, too. Italian companies are at risk of collateral damage whether Colonel Qaddafi hangs on to power, the rebels take over, or the country splits into a rebel-governed east and a Qaddafi-ruled west.
“This is the worst scenario,” said Arturo Varvelli, research fellow at the Institute of International Political Studies in Milan, arguing that Italy and its business interests would be left in a lose-lose situation: Colonel Qaddafi, still in power in the Tripolitania region, would be little inclined to do big business with Italian companies as in the past, while in the east, the rebels of the Cyrenaica region would instead turn toward other European business partners “less compromised” by ties with the regime in Tripoli.
Italy’s position on the Libyan crisis has been shifting progressively as the situation on the ground has evolved,” Mr. Varvelli said, “and now it’s the first enemy of the Libyan regime.”
That assessment has a lot of historical significance. Italy’s long colonial rule of Libya morphed into a love-hate relationship that crystallized in 2008, when Prime Minister Silvio Berlusconi apologized to Colonel Qaddafi for colonial-era transgressions and agreed to invest $5 billion in Libyan infrastructure over 20 years. The two signed an Italy-Libya friendship treaty in the city of Benghazi, now capital of the rebel movement sweeping Libya, and deepened economic cooperation on oil, banking, construction and even in the realm of top-rank soccer. Not everyone in Libya fully embraced the relationship, and it was up to Italy to pave the way, which it did by deepening its business ties with Colonel Qaddafi to the benefit of both countries.
“For a long time, Italian citizens and politicians were not very appreciated in Libya,” said Sebastiano Sali, an academic in the Department of War Studies at King’s College in London. “To settle this bitterness” left over from the colonial era, “especially on the African side of the Mediterranean,” he said, “most of the previous Italian governments have increased bilateral relations with Tripoli, and also openly supported Colonel Qaddafi as a ‘not as bad as the other’ African dictators to let him gain some legitimacy on the international stage.”
Dozens of Italian companies got in line for the lucrative contracts, while Eni, the oil conglomerate, and Impregilo, the construction company, quickly strengthened their longstanding positions in the North African country. Eni, in which the Qaddafi regime holds a 2 percent stake, is the biggest foreign company operating in Libya. But with conflict raging across the country, the energy giant recently expressed doubts that it would reach its 2011 targets.
Other Italian companies were just finding their footing in Libya when the conflict broke out this spring, as Tripoli sought to diversify its economy away from oil and increase its property and tourism sectors. Ansaldo, a construction company, won contracts worth over $1 billion for work on a coastal railroad between Surt and Benghazi. On all these kinds of projects, Italian companies were favored over other European firms, as the special relationship between Rome and Tripoli deepened.
Now, Italian companies could end up being the biggest losers if the Qaddafi government falls. “For some small and medium-sized companies, orders from Libya were the only ones they had,” said Mr. Varvelli. “I imagine, however, that Eni will be the most worried. The Libyan market was fundamental to the group’s strategy. Libyan oil was of good quality and was close by, so transport and refinement costs were low.”
The extent of Libyan investment in Italy’s fragile economy is another red flag for Rome’s policy makers.
Holdings by the Libyan Investment Authority in many of Italy’s most prized assets climbed steadily over the past years and underpinned many of these companies when the financial crisis struck in 2008. The Libyan Investment Authority has a 7.5 percent stake in Unicredit, to make it the second-largest shareholder in Italy’s largest bank; it also has shares in the Mediobanca Group. Likewise, the authority is very active in Italy’s industrial sector, with a 2 percent stake in Fiat; and it owns 7.5 percent of Juventus, the soccer club.
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