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Italy works to keep Libya options open

March 21, 2011

by Guy Dinmore in Rome, published: March 21 2011

In the century since Italy invaded Libya and decimated its population under a brutal military occupation, Rome has seen its fortunes rise and fall repeatedly in its one-time colony.

Italian air force jets joined the United Nations-sanctioned raids on Libya for the first time on Sunday and seven military bases have been made available for coalition use. But officials in Rome are mindful that whatever the outcome of this latest conflict, Italy’s priority is to ensure that it will prevail as Libya’s most important economic partner.

Much is at stake, with Italy sourcing some 25 per cent of its oil imports and 10 per cent of its gas from its southern neighbour. Infrastructure and security projects worth billions of euros are also in play.

According to senior diplomats, Silvio Berlusconi has maintained what one called a “sense of loyalty” to the dictator he had avidly courted. Behind the scenes, Italy’s prime minister blunted the impact of European Union sanctions and kept Italy out of the forefront of the no-fly zone debate although he could not deny use of Nato bases.

While the US and UK acted quickly to freeze regime assets, Italy took its time. Rome is the hub of Libya’s financial activities in Europe and Banca UBAE, effectively owned by the Libyan central bank, said it was still “operating normally” although under Bank of Italy supervision.

The foreign ministry has said some €7bn ($9.9bn) of Libyan assets had been frozen so far. It is proposing that the international community create a mechanism similar to the oil-for-food programme for Iraq for the Libyan people, using an escrow account to handle revenues from Libyan oil and gas exports.

Under pressure, the Italian prime minister did publicly call on Mr Gaddafi to step down, but this did not end tensions with Giorgio Napolitano, head of state, and Franco Frattini, foreign minister. Both worried that Italy was falling out of line with its western partners and wanted a more active policy against a regime they saw facing imminent defeat.

But even as Mr Frattini was making contact with the rebels and an Italian warship sent them humanitarian aid, Italy’s state-controlled Eni – the biggest foreign operator in Libya – continued to pump gas to feed power stations around Tripoli, and only finally stopped oil output on Thursday, industry sources said.

Its global reach and resources give Eni the authority of a shadow ministry and its chief executive, Paolo Scaroni, said on March 16 he was ready to resume pumping gas to Italy through the Greenstream pipeline “tomorrow morning”, sanctions permitting.

Sanctions would mean “shooting ourselves in the foot”, he said last week after addressing a parliamentary committee.

Whether Mr Gaddafi survives or not, history suggests that Italy can bounce back and prove Mr Scaroni correct in maintaining that Libya will still want Eni.

As a rather sombre Italy celebrated 150 years of nationhood last week, a few historically minded commentators noted that it was exactly a century ago that an orchestrated frenzy of nationalism and imperial lust set the stage for the invasion of Libya.

Territories under Ottoman rule soon fell to an Italian force of some 34,000, despite resistance from local Arabs who shocked Italians by resisting their “civilising mission”.

But it took more than two decades to pacify all of Libya and Benito Mussolini had to dispatch a much greater army to finish the job.

Aircraft dropped poison gas. Civilians were executed and tens of thousands herded in forced marches across the desert into concentration camps near Benghazi where disease accounted for the deaths of nearly half of their number. Omar el-Muktar, a teacher of the Koran and 73-year-old resistance leader, was hanged there in front of his Bedouin followers in 1931. Historians estimate some 100,000 Libyans, or perhaps many more, died under Italian rule.

Salt was then Libya’s most important commodity and it was only after the second world war that Italy – following defeat by the British in 1943 – returned to exploiting oil.

Enrico Mattei, Eni’s founder, enraged the US and British in undercutting the dominant oil companies he called the “Seven Sisters” in Iran and Libya in the late 1950s. He also funded Algeria’s nationalist movement against French rule, adding to the list of possible suspects behind his unexplained death in 1962 when a bomb blew up his plane above Italy.

Even after Colonel Gaddafi’s coup in 1969 and the nationalisation of Italian assets in Libya, Eni and Italian financiers worked their way back.

Four years ago – in an echo of the US protests against Mattei’s tactics 50 years earlier – the US embassy in Tripoli complained bitterly that Eni under Mr Scaroni had made “scary” concessions to Libya’s National Oil Company in renegotiating oil and gas contracts up to 2042 and 2047. According to a cable obtained by Wikileaks, the US embassy also questioned a $150m “social development package” Eni gave to NOC.

Mr Scaroni says he has tried to maintain contacts and contracts with NOC throughout this war so as not to lose its pre-eminent status in the country once the fighting ceases. There is speculation in Italy that other nations in the coalition might want to usurp Eni’s position.

“In all our experience in the world, whoever gets into power in the end needs to produce oil and gas,” Mr Scaroni told the FT. “At the end of the day, our position remains strong. We know the people, the fields and have the partnerships.”

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