Tapping compatibility of business, goodwill and mentality to create mutual benefits for all
Last month, Russian Prime Minister Vladimir Putin paid a visit to Italy, where he and his Italian counterpart, Silvio Berlusconi had productive talks on a series of economic and investment issues, ranging from boosting cooperation between Gazprom and Eni in the South Stream gas project in the energy sector, between Sollers and Fiat in the auto industry and Alitalia and Aeroflot in the aviation industry to the creation of new joint ventures in the atomic and other industries.
Russian and Italian leaders are, in fact, on record for the high frequencies of their meetings per year. For instance, Putin and Berlusconi met four times in 2009 in Moscow, Sochi, St. Petersburg and Ankara, where the duo had a trilateral summit with the Turkish prime minister on South Stream. Ditto for the Russian president, Dmitry Medvedev, who since coming into office in 2008 has also met several times with the Italian leadership in different countries and at various local, regional and international conferences and summits. These frequent contacts at high levels and the personal affinity developed between the leaders in the process have significantly boosted the relations between Moscow and Rome to unprecedented heights.
Any unbiased observer of contemporary international affairs and bilateral relations between Russia and its top European partners will agree that it is difficult to find a country like Italy today on the continent, whose different leaders from divergent political and ideological platforms have been able to consistently maintain friendly, and most importantly, highly productive relationships with Moscow over the past 20 years.
Indeed, Moscow and Rome have enjoyed equally friendly relations without any major disagreements on key strategic issues under different premiers and presidents, irrespective of the changes in leaderships in the Kremlin or Chigi Palace. This is because bilateral relations have thriven prosperously both under the Romano Prodi premiership and the current prime minister as well as from Putin to the incumbent Russian president.
“Moscow and Rome have, indeed, enjoyed equally friendly relations without any major disagreements on key strategic issues under different premiers and presidents, irrespective of the changes in leaderships in the Kremlin or Chigi Palace.”
This constancy has ensured that successive new leaders do not have to spend months of negotiations in trying to reboot existing relationships or search for new common grounds on thorny issues, as the Kremlin often has to do with other nations, where there had been a change of political leadership. Indeed, the political stability introduced by the smooth transfer of powers in the Kremlin, which saw current the president taking over affairs in the Kremlin and his predecessor becoming the nation’s new prime minister, fully ensured continuity in the ongoing strategic cooperation between the two countries.
Thus, speaking after meeting with a high-level Russian delegation at the Russian-Italian Consultations Forum in Rome in December, 2009, Berlusconi specifically noted that fact that a total of 24 ministers attended the event from both sides, calling the phenomenon a clear indication of the excellent state of the relationships between Moscow and Rome in all sectors. Indeed, Berlusconi has through words and deeds proved his readiness to build very close relations, not only between Rome and Moscow, but also between Russia and the European Union.
For instance, his more constructive stance on the Georgia-South conflict was pivotal to the EU’s positive mediation and final resolution of the issue; he was one of the first foreign leaders to give a seal of approval to Russia’s new initiative for upgrading European security architecture and has even gone further among his EU peers to call for a complete abolition, rather than merely simplifying, the current visa regime for Russian citizens into the EU member states. “This is because we are for much closer relations with Moscow, and one my top foreign policy priorities is to ensure that strong relations do not bind only Italy and Russia together, but also bind Russia with the EU.”
It is, therefore, not surprising that Italy is one of Russia’s closest strategic partners in Europe today, as mutual understanding in practically all spheres of bilateral and multilateral diplomacy has been established between the countries’ leaders. Indeed, both leaders have attributed this to the fact that both Russia and Italy have the same or similar views on most issues of bilateral, regional and geopolitical relevance and the readiness to initiate intensive political dialogs to seek for mechanisms for finding common grounds for arriving at compromising positions on issues, where there are divergent views. “The proximity of our economies and affinity between our governments enable those of us overseeing international politics to help one another in finding effective solutions to geopolitical issues,” Berlusconi added.
Vittorio Claudio Surdo, the Italian ambassador to Russia: "We shall see that they have enjoyed an unusual boost in recent years to reach unprecedented heights today."
Both sides take great pride in the current robust state of cooperation and the fertile grounds that had promoted its materialization. “Thanks to the positive background of our relations, it became possible for our countries to make new qualitative breakthroughs in the implementation of unprecedented projects in various fields of political, economical, social and cultural cooperation,” Vittorio Claudio Surdo, the Italian ambassador to Russia, said, commenting on the robust Russian-Italian bilateral ties which he said are currently at the highest level since the two countries established formal diplomatic relations. “If we analyze the Russian-Italian relations, beginning from the time of the Unity of Italy in 1861 till the present day, we shall see that they have enjoyed an unusual boost in recent years to reach unprecedented heights today,” he added.
And, stressing that interactions over past year had been influenced by the global economic crisis, thus disqualifying 2009’s performance as representative of the real tendencies in the two countries bilateral economic cooperation, the ambassador specifically noted the first months of 2009 have shown first signs of recovery of the positive growth pattern that began at the end of the 1990s and made Italy Russia’s third largest trade partner. “Besides, it is worth noting that this ongoing crisis has not stopped Rome and Moscow from the realization of their strategic mutual investment projects, as both are deeply convinced of their abilities to achieve even more ambitious goals,” he added. “This is why the overall assessment of the results of our bilateral cooperation over the last two years, both from the points of trade turnover and direct investments is positive.”
Interestingly, these robustly unprecedented cordial relationships are not only limited to the political and military spheres, as with lots of Kremlin’s other international partners that traditionally only want political concessions and military cooperation with Moscow, but also cover broad economic ties between both governments on one hand and representatives of the investment communities in both countries. Indeed, a special organ, the Russian-Italian Council for Economic, Industrial and Currency-Financial Cooperation, has been set up to boost and foster closer business ties between both governments and companies in both countries.
It is, therefore, not surprising that Italy, with a total volume of bilateral trade turnover figures of $53bln and gross accumulated investments of $10bln in 2008, is currently Russia’s fourth largest trading partner, after Germany, the Netherlands and China, according to the Federal Customs Service, the agency that monitors foreign economic activities in the country. Though the ongoing financial crisis put a big dent on these figures, decapitating them to just $13.9bln by June 2009, or 55% of the figures for the previous year, the overall positiveness of the interactions displayed by the two countries at the peak of the global meltdown, which are likely to grow further as the signs of global economic recovery from the worst depression in decades gain more steam and momentum are very promising indeed. “The results of bilateral trade turnover figures and economic cooperation over the years, except for 2009, are flattering indeed, but we believe that we still need to improve them further, as we are sure that there is still huge potential for boosting the current level of our bilateral cooperation,” the Italian ambassador noted.
Highlighting these issues and other positive sides of the robustly warm and unique Russian-Italian ties on his last visit to Rome in December 2009, Medvedev specially noted the high productiveness of his country’s economic cooperation with Italy, calling Rome one of Russia’s most important and largest trading partners on the international markets. And, calling on businesses in both countries to assume additional responsibilities for pushing back the dwindling bilateral trade and investment figures caused by the crisis, the president specifically tasked Russian and Italian businesses CEOs to capitalize on the extraordinarily warmth and uniqueness of the bilateral cooperation that had put the bilateral trade figures at over $50bln in the precrisis era.
Arturo Maria Cardelus, CEO of Ferrero Russia: “However, the company’s aggregated investments into the Russian economy are certainly much higher. Besides, our company has consistently and responsibly executed all its business activities in Russia as a responsible taxpayer, good-faith employer as well as a very reliable and lucrative business partner to its Russian counterparts."
It must be said here that the Russian political leadership is well-disposed to Italian investors in Russia. For instance, in April 2009, a high-profile delegation of Italian businesses, comprising 1000 representatives of more than 500 largest companies, arrived in Moscow to establish/renew contacts with their Russian counterparts at the Russian-Italian Economic Forum, where the Russian prime minister featured as the occasion’s guest speaker. Later, the Russian president also met with some of the delegates, notably CEOs of such companies as Confindustria Italian Banking Association, Eni, ENEL, Finmeccanica, Fincantieri, Indesit, Danieli as well as Unicredit and Indesa. “One of the key aspects of the unique of Italian economic ties is that Italian businesses, unlike most corporations from other countries, are not operating only in our most developed cities such as Moscow and St. Petersburg, but also in several other towns, where, honestly speaking, the conditions for private entrepreneurship are much tougher and business and social infrastructures are least developed,” he added.
This means that most Italian companies are not only seeing Russia as a sales outlet for their overseas-bound goods and services, but also as a key market for long-term investment commitments. This is evident in these companies’ relocations and even localizations of some of their most advanced production facilities and technologies in the country. For instance, Indesit, a major Italian refrigerators and washing machines manufacturer, is active in the Lipestk Region, Investitore Internationale, the maker of polypropylene products, is operating from Tatarstan, while the Italian Kerama Marazzi Group, one of the leaders on the global ceramic markets, has pumped over 300mln euros into setting up production facilities on the base of its local partners — Velor in the Moscow region and a sanitary glazed earthenware production plant in the Orlov Region.
There are several other examples of successful Italian businesses operating across the country’s nine zones. Thus, Ferrero, a major player on the global confectionary markets, has already injected almost 200mln euros in setting a local production plant in the Vladimir Region that will supply Russia and other CIS markets with its famous confectionaries. “This is why the fact that Italian investors are not afraid to venture further into proper and remote parts Russia means a lot to us, much as we also highly value the fact that Italian investors are not only interested in establishing contacts with our largest corporations, but also with small- and medium-sized companies,” the Russian president noted.
This is view is shared by business representatives in both countries. Thus, commenting on the Russia’s current investment climate, from the point of view of ‘ease’ of doing business for foreign investors, Arturo Maria Cardelus, CEO of Ferrero Russia, says he strongly believes today’s Russia is one of the most attractive countries in the world for foreign investments. “The political and economic stability of the last decade, the government’s consistent actions aimed at creating an attractive investment climate for foreign investors have over the last years helped to significantly boost the country’s investment attractiveness,” he added. And, commenting on his company’s investments in the country, Cardelus says the over 200mln euros already invested in the Vladimir Region plant covered the execution of the first phase of this project. “However, the company’s aggregated investments into the Russian economy are certainly much higher. Besides, our company has consistently and responsibly executed all its business activities in Russia as a responsible taxpayer, good-faith employer as well as a very reliable and lucrative business partner to its Russian counterparts." Tommaso Fumelli, Alitalia’s general manager for Russia, Ukraine and Belarus, also offers a similar view, noting that the reciprocal friendship between Russia and Italy goes much beyond commercial activities, a phenomenon that has encouraged Alitalia to invest seriously into Russia.
Tommaso Fumelli, Alitalia’s general manager for Russia, Ukraine and Belarus: "One of Alitalia’s key competitive advantages is the Italian brand, what we call “Made in Italy,” a trademark that portrays style, awareness and prestige all over the world."
Meanwhile, an opposite view on this subject is held by Sergio Forelli, an attorney-at-law and partner, at the legal firm, Studio Associato Legale Tributario, noting that the current investment climate, in spite of all the measures taken in recent years by the Russian government, is still far from idealistic, due mainly to the gaping lack of adequate protection of investors’ rights in the country. “Basically, this can be explained by the extensive use of the so-called ‘administrative resources’ in pressurizing investors in the country, and also the fact that the legal and normative acts adopted at the federal level to guarantee investors’ rights are usually not effectively implemented at the local and regional levels,” he added. “Consequently, in practice, investors face arbitrariness and lawlessness from governments at the local and regional levels, while the lack of transparency in the judicial and administrative systems creates a fertile ground for gross power abuse and corruption. It is our sincere hope that the ongoing reforms of the judicial system will help improve the situation.”
Commenting on the ongoing robust cooperation between Rome and Moscow, the Russian prime minister, who as the president oversaw the current renaissance in the Russian-Italian ties that boosted the bilateral trade turnover figure to over $32bln in 2007, specifically noted the broadness and full diversification of interactions that stretch across all spheres of bilateral diplomacy. “Today, our economic relationships are highly diversified, ranging from the automobile, aviation, aeronautics and hi-techs to transportation and energy industries. In fact, our cooperation covers all sectors of our economies.”
It will be impossible to list everything in the course of an article of this nature, but a few outstanding examples will illustrate the depth and scope of the economic and business ties between Russia and Italy. For instance, in April 2005, Italian astronaut Roberto Vittori flew to the International Space Station in a Russian spacecraft, Soyuz, while Italian company Alenia Aeronautica has entered into a strategic partnership with Russia’s Sukhoi Civil Plane Co. for the production of the latter’s SuperJet-100 brand, which is expected to ‘revolutionize’ both the Russian and international short- and medium-range aircraft markets in terms of quality to price ratio.
Attorney-at-law and partner, at the legal firm, Studio Associato Legale Tributario: "SALT adopts a flexible policy for its clients and seeks to work not only with internationally famed companies, but also with SMEs that are often in need of more attention and support."
Besides, these two energy giants are also partnering via the joint venture company, South Stream AG, in the execution of Russia’s South Stream, a multibillion-dollar gas transportation pipeline that will carry gas straight to southern Europe via the beds of the Black Sea. Italy is also heavily represented in the Russian electricity generation industry via Enel’s acquisitions of a 49.5% stake in Russia’s Rusenergosbyt, a local electrical power distribution company and a controlling stake of almost 70% in OGK-5, a major electrical power generation company in Russia.
Similarly, strategic agreements have also been reached in the atomic sector between RosAtom, a state-owned corporation that oversees the production, sales and uses of ‘peaceful atomic energy’ in Russia and abroad, and the Italian Economic Ministry, which envisage deeper cooperation in building third-generation reactors and researches into and development of the prototypes for the development of a fourth-generation reactor.
The Italian banking system is also generously represented on the Russian financial services market as most major Italian banking institutions are operating in the country, while some such as Intesa and Unicredit have even gone further by localizing their operations via chartering local banks in the industry. These banks help provide funding for joint projects between Russian and Italian corporate entities.
Similarly, the Italian market has also turned to be highly favorable to Russian investors, evident from the fact that unlike other major European countries, Italy has not ever hindered, but quite the contrary, has always promoted the inflow of Russian capital into the local economy, a policy it has pledged to continue. The result is an influx of Russian corporations and their capital into Alpine country. Thus, apart from Gazprom, other major Russian corporations currently active on the Italian market include aluminum giant, the Severstal Group, which has acquired the Lucchini Group, a local metallurgical company that is one of the most dynamic and diversified Italian producers of steel, the Evraz Group, which owns the Palinni and Bertoli factories in Italy, and LUKoil, which via a joint venture company chartered in partnership with Italy’s ERG, bought the ISAB petrol processing factory for almost $1.35bln to get the majority shareholding control of 51% in the venture. The plant — located in the Sicilian city of Priolo — is not just the largest in Italy, but also throughout the whole of the Mediterranean region.
Even culture and linguistic aspects are not left out in the robust bilateral cooperation as Moscow and Rome have officially declared 2011 the “Year of Italian Culture and Language in Russia” and the “Year of Russian Culture and Language in Italy.” The unprecedented scale of programs being lined up by the Kremlin and Palazzo Chigi as well as ministries and representatives of business communities in both countries to successfully mark these events throughout next year are further evidences, if any is still needed at all, of the unique nature of the ongoing strategic partnership and bilateral cooperation between the two countries.
Indeed, the excellent state of the relations between Moscow and Italy was best summed up by Alexei Meshkov, the Russian ambassador to Italy, who, when fielding questions at one of his recent press conferences, called the dynamic bilateral ties ‘a role model of friendly relations’ worthy of emulation not only by other European nations, but also by Russia’s other partners on the international arena. “This is because Russia and Italy have been able to attain unprecedented milestones in realization of objectives outlined in their strategic partnership.”
Again, like at the beginning of this report, one can again take the liberty to assume that most observers of contemporary international affairs and diplomatic relations will subscribe fully to the ambassador’s apt assessment of the ongoing relationships between Moscow and Rome. Indeed, it will be extremely difficult, if at all possible, to find a better epitome that will so comprehensively, and at the same time, so succinctly highlight all the key aspects of the existing multi-vector partnership and cooperation in all fields of human endeavors between both countries.
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