‘Italy-Russia deal is equal to one with drug cartels’

When Russia signed a €1 billion investment deal with Italy in November, it was seen in some quarters as a welcome boost to the Italian economy, while others raised fears over the Kremlin's growing influence in Europe and possible corruption. The Local takes a look at the pros and cons.

'Italy-Russia deal is equal to one with drug cartels'
Russian President Vladimir Putin (L) and Italian PM Enrico Letta announced a €1bn mutual investment fund in November. Photo: Alexander Nemenov/AFP

Russian President Vladimir Putin left Italy at the end of November with a €1 billion joint investment deal and a total of 28 agreements signed with Italy.

The state visit was praised by Italian Prime Minister Enrico Letta, who following talks in Trieste, said “Italy has to develop its international market and encourage more direct investments”.

But some see the deal as a short-sighted attempt by Italy to sell its way out of recession, with little thought to the wider implications of doing business with Russia.

Matteo Mecacci, a former MP in Italy, says the deal signals a break away from earlier Italian governments’ approach to Russia.

“What was remarkable in Trieste was to see Letta and Foreign Minister Emma Bonino unable to articulate anything but a call for greater economic cooperation with Russia, as one of the important ways to solve economic problems,” Mecacci tells The Local.

After two years of recession, Italy has more than two trillion euros of public debt. The government has forecast a return to growth next year and is counting on reforms and foreign investment to help it on its way.

SEE ALSO: Pact with Russia will 'stimulate mutual growth'

Russia could offer hope for Italy’s struggling economy: the country’s energy companies Eni and Enel were reportedly involved in the November talks, while shipbuilder Fincantieri signed a deal in Trieste.

The two countries have long been partners; last year trade between Italy and Russia reached €33.8 billion and rose in 2013.

But while earlier Italian governments coupled trade talks with a push for institutional reform in Russia, this part of Italy’s diplomatic strategy “has [now] resulted in a complete failure”, according to Mecacci.

“Replacing the need for a political strategy with money talks is dangerous,” the politician says, and risks “damaging Italy’s political role in Europe”.

By investing in the eurozone’s third largest economy, Russia gains an entry point into the European economy. Bill Browder, CEO of Hermitage Capital Management, an investment fund specializing in Russia, sees this as worrying for both Italy and the EU.

“By Russian investors putting their money into Europe, they’re co-opting Europeans into their oftentimes money laundering exercises,” Browder told The Local.

SEE ALSO: Police crack down on Spain's Russian mafia

Browder has first hand experience of the challenges of doing business with Russia. In 2007 Hermitage lawyers accused Russian authorities of being involved in a $230 million (€166 million) tax fraud; Russia then made a counter-claim that Browder and his team had, in fact, orchestrated the fraud and threw Hermitage lawyer Sergei Magnitsky in prison. 

Magnitsky died under suspicious circumstances in prison in 2009 and was tried posthumously along with Browder in absentia. The guilty verdict passed down in July this year was marred by "unfair procedures and unconvincing evidence", according to Catherine Ashton, the EU's foreign minister.

Following a campaign by Browder, who was banned from Russia before Magnitsky died, US lawmakers in 2012 passed the Magnitsky Act, which froze the assets of Russian officials allegedly involved in the lawyer's death and banned them from the country.

Browder is now campaigning to have the law replicated across the EU.

“Russia is far more corrupt than peoples' even more pessimistic expectations,” says Browder. “Everyone should be worried about the infiltration of Russian mafia money in Europe.”

Last week, Transparency International ranked Russia 127th out of 177 countries in its annual Corruption Perceptions Index, while Italy came in 69th place.

“The majority of Russian money comes from crime,” adds Browder, who alleges the proceeds of fraud uncovered by the Magnitsky case has been traced to 13 European countries.

Well aware that Russia will continue to do deals with Italy and other European countries, Browder urges caution: “It’s very hard for people to stop Russian money coming in but it should be subject to scrutiny, as with other money from dubious sources.”

No matter Italy’s economic woes, the hedge fund manager warns against financial deals with the Kremlin at all: “It’s equivalent to taking money from the Colombian drug cartels.

“How desperate is Italy? What values are they willing to give up?”

Neither the Russian Direct Investment Fund or the Italian Strategic Fund, signatories of the €1 billion deal, were available for comment when contacted by The Local. 

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‘Look for the rubles. Good luck’: Salvini fends off Russia claims

Salvini is fighting tooth and nail against suggestions that his far-right League party tried to get covert Russian payments during talks in Moscow last year.

'Look for the rubles. Good luck': Salvini fends off Russia claims
Matteo Salvini has claimed his support for Russian president Vladimir Putin comes "for free". Photo: Andreas Solaro/AFP
But the revelation by news website Buzzfeed of a conversation recorded in a Moscow hotel between one of Salvini's top lieutenants and three Russians discussing covert payments has put him on the back foot.
The first reports of these meetings surfaced in the Italian press in February. But the scoop by online news website Buzzfeed — based on an audio recording of the talks — pushed it back centre stage and was widely reported in Italy.
The deal under discussion was to covertly divert $65 million (58 million euros) to the League by means of discounted Russian oil transactions through intermediaries.
Buzzfeed identified Gianluca Savoini of the League as one of three Italians talking to three Russians. It said the talks took place in October.
Former journalist Savoini, 56, is married to a Russian and is president of the Lombardy-Russia association. He is considered one of the League's main contacts with Russia.
“A hoax, a fraud, a piece of dirt,” Savoini told Italian daily La Repubblicca, describing the Buzzfeed story.
When the story broke on Wednesday, Salvini denied it. “Never taken a ruble, a euro, a dollar or a litre of vodka in financing from Russia,” he said in a statement.
But he has never hidden his admiration for Russian President Vladimir Putin, who visited Italy only last week. And during his visit, Putin referred to a cooperation agreement between his United Russia party and Salvini's League.
Salvini's says his support for Putin, his fight to overturn European sanctions imposed against Russia for their 2014 annexation of Crimea from Ukraine, comes “free”. His position is a matter of conviction, he insists.
 Ongoing investigation
According to reports in the Italian press, prosecutors are already investigating Savoini, put on the trail by earlier accounts of the Moscow meetings published in the Italian press.
Under the terms of a deal it reached last September, the League is already paying back 49 million euros of fraudulently obtained election expenses claimed between 2008 and 2010, before Salvini took over as leader in 2013.
The agreement the party reached with Genoa prosecutors to pay the money back over a period of decades went down very badly with opposition parties, and Salvini has had to take the heat from that agreement.
In parliament, opposition deputies held up signs reading “65 million” and “49 million” to link the two affairs. Former prime minister Matteo Renzi of the centre-left Democratic Party described Savoini's talks in Russia as “high treason”.
This latest affair bears some resemblance to the scandal that brought down Austrian nationalist Heinz-Christian Strache in May.
Leader of the far-right Freedom Party (FPOe), Strache resigned on May 18 after a hidden-camera sting filmed in a luxury villa on the island of Ibiza, in which he appeared to offer public contracts in exchange for campaign help from a fake Russian backer.
But Buzzfeed is convinced that its recording is not of a sting but of talks between genuine players on both sides — even if Savoini is not as senior a figure as Strache was.
“I've never met him personally,” said Prime Minister Giuseppe Conte of Savoini. The latter, however, was among the guests to a formal dinner given in Putin's honour in Rome last week.
He appears in a photo of the event, standing in the background as a smiling Putin and Conte exchange toasts.
“He wasn't invited by the interior ministry,” said Salvini at a press conference Friday.
With an exasperated air he said: “Guys, let me do my job seriously. Look for the rubles — good luck. And me: I'll do my job. I think this investigation is ridiculous.”
But the story was still making headlines Saturday. “Salvini couldn't not know” said one in La Repubblica.
International lawyer Gianluca Meranda wrote to the paper to identify himself as one of the other people recorded at the October meeting in Moscow.
He confirmed negotiations, but said that the talks about an oil deal had not in the end led to anything. He denied any question that this was about getting funding for the party. But he was happy to talk to prosecutors, he added.