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EXPLAINED: How Italy could be impacted by Russia’s invasion of Ukraine

Tensions between Russia and western nations have increased following Russia's invasion of Ukraine. The Local takes a look at Italy's stance and how the country could be impacted.

EXPLAINED: How Italy could be impacted by Russia’s invasion of Ukraine
Activists carry Ukrainian and EU flags at a demonstration in Kyiv on February 22, 2022.. Photo by Sergei SUPINSKY / AFP

What is Italy’s relationship with Russia in general?

Despite the geographical distance between Italy and Russia the two countries have long had a relatively close relationship, with some analysts suggesting Italy is Russia’s “biggest European friend”.

Italy has historically had friendlier ties with Putin than many other Western nations, backed by strong business relationships – primarily investments by Italian corporations in Russia. State-controlled energy group Eni has long-term gas contracts with Russia and agreements with oil group Rosneft, which are on hold.

As the Ukraine crisis deepened, Russian President Vladimir Putin held a video call with heads of major Italian energy firms earlier in February at which he reportedly stressed the importance of their links.

The Italian government deemed the meeting inappropriate and asked energy bosses not to attend, though many still did, including the head of state-backed Italian energy firm Enel.

In the Ukraine crisis of 2014-2015, such corporate ties were a major factor in Rome’s push to prevent tough EU sanctions on Russia under the government of Matteo Renzi.

As well as business links, there have long been close relations between Russia and major political forces in Italy.

Russian President Vladimir Putin meets with former Italian prime minister Silvio Berlusconi in Rome in 2019. Photo by Alexey DRUZHININ / SPUTNIK / AFP

Prominent examples of those ties include the famously close and long-standing friendship between Putin and disgraced former Italian prime minister Silvio Berlusconi, while hard-right League party leader Matteo Salvini has often expressed his admiration of the Russian president and repeatedly called for an end to previous EU sanctions against Moscow.

But political analysts say Italy’s stance on Russia is becoming increasingly aligned with that of Germany and other major EU powers under the current government, since former European Central Bank head Mario Draghi became prime minister in February 2021.

PROFILE: Who is Italian prime minister Mario Draghi?

While Berlusconi, Salvini, and other Italian political forces believed to be sympathetic to Russian interests remain influential as part of Italy’s current broad coalition government, the prime minister himself has repeatedly stressed Italy’s commitments to the EU and NATO.

What has Prime Minister Mario Draghi said?

Draghi immediately condemned Russia’s attack on Ukraine on Thursday morning, describing it as “unjustified and unjustifiable”.

Later on Thursday, Draghi demanded that Russia “withdraw unconditionally” from Ukraine, saying the invasion of the pro-Western nation “concerns all of us, our lives as free people, our democracy”.

He added that Rome was strengthening its “contribution to military deployment in all the most directly exposed Allied countries”.

READ ALSO: Italy condemns Russian invasion of Ukraine and summons ambassador

Draghi has faced criticism in some quarters for appearing lukewarm over Western sanctions against Russia, particularly after he said on Friday that these should not be applied to energy imports. 

He was unusually outspoken last month in playing down the risk of a Russian invasion of Ukraine, but he has also made clear that Italy’s place in NATO takes precedence over friendly relations with the Kremlin.

Italian Prime Minister Mario Draghi gives a speech in Rome on February 24th after Russian forces invaded Ukraine. Photo by Remo Casilli / POOL / AFP

On Thursday, Draghi said Italy was “fully aligned” with its partners and would decide “on a very tough package of sanctions against Russia”, AFP reports.

“We have made it clear in every forum that we are ready to impose severe consequences if Russia…rejects our attempts to resolve the crisis through political means. Now is the time to apply them.”

Rome would “do whatever it takes to preserve Ukraine’s sovereignty, Europe’s security, and the integrity of the international order based on the rules and values we all share,” he said.

How will Italy’s economy be impacted?

Gas prices are the most obvious cause for concern in a country as heavily reliant on imports as Italy.

Italy is more dependent on natural gas for energy than most of its European neighbours and imports 90 percent of its gas supply, according to Reuters, with Russia supplying around 40 percent.

As in the rest of Europe, consumers and businesses in Italy are already struggling with the rising cost of energy after a series of sharp price hikes over the past year, fuelled by the surging price of natural gas.

Analysts point out however that the cost of energy will be less of a concern in Europe as it heads into the summer months. If conflict continues into the winter, the scenario may be different.

READ ALSO: How will the Russian invasion affect Italy’s gas supplies and prices?

Italy is a key export market for Russian energy giant Gazprom. Photo by Kirill KUDRYAVTSEV / AFP

Food prices are also likely to be affected in Italy, which imports a majority of its wheat and corn.

“The war is aggravating the problems of the national agricultural sector, which is already suffering from the effects of price volatility,” the Coldiretti agricultural association stated on Thursday.

Agricultural commodities are usually much less volatile than stocks or oil, but have recently seen spectacular spikes and drops provoked by Russia’s looming invasion of Ukraine.

The stakes are especially high for wheat, with Russia being the world’s top exporter and Ukraine the fourth according to estimates by the US Department of Agriculture (USDA).

But the consequences for agricultural markets of Russia’s invasion of Ukraine on Thursday are still difficult to predict.

“It is totally unprecedented,” Sebastien Poncelet, an analyst with the French consultancy Agritel, told AFP.

“When we see that there are explosions in Odessa, which is the main Ukrainian port, we must assume there will not be much grain loaded there today,” he said.

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ITALIAN POLITICS

Will Italy’s Five Star Movement split throw the government into crisis?

After the largest party in Italy's coalition government imploded over the country's response to the Ukraine war, Prime Minister Mario Draghi on Wednesday called for unity. Is another political crisis on the horizon?

Will Italy's Five Star Movement split throw the government into crisis?

Draghi has taken a firm, pro-EU line on Russia’s invasion of Ukraine: sending weapons to Kyiv, backing sanctions on Moscow despite Italy’s heavy reliance on Russian gas, and supporting Ukraine’s hopes of joining the European Union.

But there have been rumblings of unease within his coalition government, which burst into the open on Tuesday with a split in parliament’s biggest party, the Five Star Movement.

Foreign Minister Luigi Di Maio announced he was leaving the party amid disagreements over how Italy should respond to the Ukraine war.

An estimated 60 lawmakers are following him into his breakaway group, named “Together for the Future” – just over a quarter of Five Star’s MPs.

READ ALSO: Italian government rocked by Five Star party split

The move risks upsetting the fragile balance of power in Draghi’s coalition government, a year before general elections are due and at a difficult time for Italians battling skyrocketing inflation.

A vote on Wednesday suggested parliament still overwhelmingly backs the premier, with the lower Chamber of Deputies approving by 410 to 29 a resolution supporting the Ukraine policy.

The Senate similarly approved it on Tuesday.

Luigi Di Maio (R) applauds after Prime Minister Mario Draghi (L) addresses the Italian Senate on June 21st, 2022. Photo by Filippo MONTEFORTE / AFP

“Unity is essential in these moments because the decisions that must be taken are very difficult,” Draghi said before Wednesday’s result, which came one day before an EU summit in Brussels begins.

In an uncharacteristically combative address to deputies, Draghi accused those who disagreed with his policy of effectively calling on Kyiv to surrender.

“There is a fundamental difference between two points of view. One is mine – Ukraine must defend itself, and sanctions and the sending of weapons serve this goal,” Draghi said to applause.

“The other point of view is different. Ukraine must not defend itself, we shouldn’t do sanctions, we shouldn’t send armaments, Russia is too strong, why should we take her on, let Ukraine submit.”

Di Maio had made a similar attack on members of his own party at the weekend, paving the way for Tuesday’s defection.

Five Star leader Giuseppe Conte, the country’s former premier, has argued that Italy should focus on a diplomatic solution, warning against getting involved in an escalating arms race.

Conte and Di Maio have been at odds since long before the war, however.

Five Star leader Giuseppe Conte stressed that his party still backed the coalition, saying: “Support for Draghi is not up for discussion.”

Nevertheless, some commentators believe Draghi’s coalition government – involving all main political parties except the far-right Brothers of Italy – will start to splinter ahead of 2023 elections.

The Five Star split is likely to weigh on “the entire political system, starting with Draghi, who is now more shaky than before,” wrote La Stampa columnist Marcello Sorgi.

The defections in Five Star leave the anti-immigration League of Matteo Salvini as the biggest party in parliament, but it too is struggling with waning public support.

Media reports this week suggest this could work in Giorgia Meloni’s favour in the next election – the far-right Brothers of Italy leader is now being touted as potentially becoming the country’s first female prime minister, as her party remains the only one in opposition to Draghi’s coalition.

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