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Italy’s Eni says no to sanctions against Libya

March 16, 2011

By Guy Dinmore in Rome and Joshua Chaffin in Brussels, Published: March 16 2011

Eni, Italy’s state-controlled energy company, has urged Europe not to extend sanctions against Libya to include its oil and gas assets, warning that such steps would be “shooting ourselves in the foot”.

Paolo Scaroni, chief executive of Eni, the biggest foreign operator in Libya, also defended his decision to keep producing gas during the conflict there to supply power in the Tripoli area under control of Muammer Gaddafi’s regime.

Mr Scaroni set out his case against sanctions as the European Union wrangled over its response to the rapid advance of Col Gaddafi’s forces and the realisation that his regime might survive much longer than thought a week ago.

Diplomats in Brussels said Italy was resisting efforts to impose sanctions against Libya’s National Oil Company, as implemented by the US on Tuesday.

Although EU and UN measures so far have not targeted Libyan oil and gas, output has almost ceased because of fighting around terminals. Western banks are refusing to clear payments because of US sanctions on dollar transactions and EU measures against Libya’s central bank.

The comments by Mr Scaroni came as troops loyal to Col Gaddafi have retaken control of the bulk of Libya’s oil and gas sector.

But the International Energy Agency has warned that Libyan oil will remain off the market “for a considerable time” as the result of “war-inflicted damage on oil infrastructure” and a tightening of international sanctions.

The oil watchdog said exports would come only in “months rather than weeks”. Libya has supplied Italy with about 25 per cent of its oil imports and 10 per cent of its gas through the undersea Greenstream pipeline. Libya is the single largest energy source for Eni, accounting for 13 per cent of its worldwide oil and gas production

After addressing a parliamentary committee, Mr Scaroni said Eni could resume gas imports through Greenstream “tomorrow morning”, but he was wary of violating sanctions. “Imposing sanctions means shooting ourselves in the foot,” he said, and not taking Libyan gas would compromise Italy’s energy security.

This week Mr Scaroni wrote to Hillary Clinton, US secretary of state, explaining why Eni was still producing gas for Libyan consumption and asking for exemption from US sanctions that might affect Eni as a company listed on the New York stock exchange with significant interests in the US. He also asked for political support from Catherine Ashton, EU foreign policy chief.

Eni acts as a considerable force within the Italian foreign policy establishment and even though Mr Scaroni declared “I am not a minister” to analysts in London this week, he is widely regarded in Rome as having the powers of one. Eni is 30 per cent owned by the Italian government and has been active in Libya since 1959.

Mr Scaroni last week told the Financial Times that he expected Eni to be doing business with Libya in the future, regardless of who was ruling the country.

Eni has the support of Silvio Belusconi, Italy’s prime minister, who avidly courted Mr Gaddafi to secure Italy’s energy interests and enlist Libyan support in cutting off the flow of African migrants crossing the Mediterranean.

Although Mr Berlusconi has called on his former ally to relinquish power, diplomats say that behind the scenes the Italian prime minister worked to blunt the impact of economic sanctions.

An Italian official said Rome had suggested that if the EU decided to blacklist Libya’s National Oil Company then an internationally monitored mechanism should be established to ensure that part of oil revenues be used to meet the “basic needs” of the Libyan people along the lines of the Iraq oil-for-food programme.

That programme, established by the United Nations in 1995, became widely discredited and undermined by corruption within UN agencies and implementing governments.

Additional reporting by Javier Blas in London.

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