ID:172335
    Date:2008-10-02 15:08:00
    Origin:08ROME1226
    Source:Embassy Rome
    Classification:SECRET//NOFORN
    Dunno:
    Destination:VZCZCXRO7086
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S E C R E T SECTION 01 OF 06 ROME 001226 
 
SIPDIS 
NOFORN 
 
FOR THE PRESIDENT FROM THE AMBASSADOR 
 
E.O. 12958: DECL: 10/03/2018 
TAGS: PREL, PGOV, IT 
SUBJECT: SCENESETTER FOR PM BERLUSCONI'S OCTOBER 13 TRIP TO 
WASHINGTON 
 
ROME 00001226  001.2 OF 006 
 
 
Classified By: Ronald P. Spogli, Ambassador, for reasons 1.4 (b) and (d 
). 
 
1. (C/NF) Summary. Mr. President, Silvio Berlusconi's October 
13 visit to Washington provides an opportunity to strengthen 
our close ties with a valuable ally in Europe.  Since your 
June 11-13 visit, Berlusconi has consolidated the standing of 
his government in Italian public opinion through a series of 
domestic reforms designed to stave off economic crisis and 
political malaise.  His preoccupation with domestic 
challenges has limited his ability to contribute as fully to 
our shared international goals as he has in the past, but 
under his guidance the Italian government has become more 
vocal in its support of the ISAF mission in Afghanistan and 
mustered the courage to push for a tougher public line on 
Iran.  However, fear of casualties in Afghanistan may be 
preventing Berlusconi from making good on his commitment to 
you to assume a stronger military role in ISAF.  In addition, 
Berlusconi's friendship with Putin and Italy's growing 
dependence on Russian energy supplies has led him too often 
to stray into apologetics for Russian behavior in Georgia. 
His visit provides us an opportunity to shape Berlusconi's 
thinking as Italy prepares for Italy's G8 presidency next 
year.  End Summary. 
 
Domestic Politics: Berlusconi Firmly in Control 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
2. (C) Prime Minister Silvio Berlusconi is in an enviable 
position domestically, enjoying so comfortable a majority in 
parliament he can pass virtually any legislation without the 
support of the opposition.  You will find him upbeat and 
self-confident, having successfully mediated a high-stakes 
deal to bring Alitalia back from the brink of bankruptcy. 
Berlusconi used his first five months back in government to 
deliver results on election promises, though long-term 
solutions to most problems are still needed. The trash 
problem in Naples is not yet permanently solved, but the 
streets are cleared and troops are keeping dumps and 
incinerators open. Public worries about street crime have 
been addressed by a sweeping new security law.  A public 
finance law has overhauled the annual budget process, which 
traditionally has eaten up months of Parliament's time, but 
Italy's faltering economy casts doubt on whether budget 
targets will be met. Berlusconi's government drafted and 
passed these laws mostly without consulting the center-left 
opposition, which has grown more fragmented and less 
effective. 
 
3. (C) This fall's almost entirely domestic agenda leads with 
fiscal federalism (a priority for Berlusconi's allies in the 
Northern League) and justice reform, which is a combination 
of personal safeguards for Berlusconi and long-needed reform 
for a justice sector that is overly politicized and 
ineffective.  Planned budget cuts in Defense may weaken 
Italy's contribution to NATO and UN operations over the long 
term, but funding for key areas such as ISAF should remain 
untouched.  Most foreign policy initiatives will be directed 
by Berlusconi personally without the need of any legislation. 
Given Berlusconi's personal popularity, his coalition's 
strength, and the center-left's state of disarray, most of 
our interlocutors agree that Berlusconi has a largely clear 
path ahead. 
 
Sluggish Economic Growth 
- - - - - - - - - - - - - 
 
4. (SBU) Although Italy ranks as the world's seventh largest 
market economy, its influence and stature as a G8 member is 
threatened by perennially sluggish economic growth. Its 
economy has grown a full percentage point slower than the EU 
 
ROME 00001226  002.2 OF 006 
 
 
average this decade. A burdensome bureaucracy, corruption, 
organized crime, a low birth rate, severe labor market 
rigidity, a weak educational system, and a business culture 
that rewards connections instead of merit are all factors 
contributing to stagnation.  Italy's slow economic growth 
rate limits its ability to be the kind of "boots on the 
ground" ally that we want it to be. For example, Italy will 
this year cut its foreign assistance budget by 60 percent. 
Italy is also becoming increasingly concerned about the 
impact of the U.S. financial crisis on its economy. 
Berlusconi will join other EU leaders this weekend in a Paris 
summit called by President Sarkozy to discuss the financial 
crisis. Ironically, however, because of its relatively low 
level of integration into world 
financial markets, Italy may actually be spared some of the 
economic challenges confronting some of its EU colleagues. 
 
5. (SBU) To address this economic threat to our alliance, in 
2006 the Embassy launched the Partnership for Growth, an 
ambitious, multi-faceted effort to spur economic dynamism by 
helping move research to market, grow risk capital markets, 
support innovation by strengthening intellectual property 
rights, and create Italian entrepreneurial role models. 
 
6. (SBU) We have made tremendous progress. As you saw first 
hand when you participated in the Partnership for Growth 
event at the American Academy of Rome in June, we have 
strengthened the hands of those Italians who want to move 
their country forward, and in doing so we have greatly 
improved Italian perceptions of the United States. I am happy 
to report that because of our Partnership for Growth, in 
Italy, the words "innovation" "growth" and "entrepreneurship" 
are now usually associated with the United States of America. 
 We want to move this program to the next level to ensure 
that it is rooted and has strong Italian ownership. We call 
this our "Partnership for the Future." We are seeking to 
identify USG funding of USD 400,000 in FY 2009 to support 
this effort. 
 
Not Seeing Eye-To-Eye on Russia - At All 
- - - - - - - - - - - - - - - - - - - - 
 
7.  (S/NF) Italy's stance vis-a-vis Russia has become a point 
of friction in what is otherwise an almost friction-free 
relationship.  Berlusconi directly manages Italy's 
relationship with Moscow and since the August Russia-Georgia 
crisis he has criticized Georgia, apologized for Russia and 
gone so far as to claim credit for dissuading Putin from 
occupying Tbilisi.  His desire to see Russian actions in 
Georgia as "an isolated incident," as he told Vice President 
Cheney recently, has been unswayed by facts.  Berlusconi's 
self-styled role as "mediator" between Moscow and Washington 
has been supported here by the full political spectrum; even 
the center left has had little critical to say of Italy's 
Russia policy.  Italian officials continue to insist that 
Russia's demands on Kosovo, Georgia, Ukraine and Missile 
Defense get a fair hearing in transatlantic and international 
fora. 
 
8. (S/NF) GOI officials were already cautious on the prospect 
of a NATO Membership Action Plan (MAP) for Georgia and 
Ukraine before the Russia-Georgia crisis this summer: now, it 
is clear from official commentary and body language that 
there is a high degree of anxiety in GOI circles over the MAP 
question.  While the GOI has criticized Russia's recognition 
of South Ossetian and Abkhaz independence, it continues to 
insist that Russia not be isolated because it is an 
"essential player." We have advised the Italians that taking 
a soft line on Russian actions against Georgia could damage 
their credibility, as well as substantively impact our 
collective prospects for gaining cooperation from Moscow.  We 
 
ROME 00001226  003.2 OF 006 
 
 
are also concerned by a growing sympathy for Medvedev's calls 
for a new security framework to supersede NATO, OSCE, and 
CFE.  It would be useful for Berlusconi to hear from you 
directly and candidly that public endorsement of Russia's 
activities threaten to sow discord in transatlantic relations. 
 
9.  (S/NF) The presence of a strong communist party and a 
history of leftist governments in Italy gave Russia a degree 
of influence not seen in any other Western European country. 
More recently, a commercial dependence on Russia, 
particularly in the energy sector, and a close personal 
relationship between Putin and Berlusconi based on mutual 
commercial interests and Berlusconi's preference for dealing 
with assertive world leaders appear to be greater motivating 
factors in Italy's relations with Russia. 
 
Russia and Energy Security 
- - - - - - - - - - - - - 
 
10. (C/NF) Italy's dependence on energy from Russia also 
remains a cause for concern, although Italy is less dependent 
on Russia for energy than many of its EU partners. Its 
location gives Italy easier access to a more diverse range of 
energy resources than other EU countries. There are already 
natural gas pipelines from Libya and Algeria to Italy. An 
Algeria-Sardinia-Italy pipeline is being planned. Italy hopes 
to make increased use of Liquid Natural Gas (LNG); a recently 
completed LNG terminal will bring new gas from Qatar starting 
in early 2009. Italy also supports the Turkey-Greece-Italy 
(TGI) pipeline projects intended to bring Caspian basin 
natural gas to Western Europe. Connections to other sources 
of energy notwithstanding, Italy's overall dependence on 
Russia for 30 percent of its energy needs will likely 
continue for the foreseeable future. 
 
11. (C/NF) Italy's energy company ENI (30 percent owned by 
the Italian government) is now a major partner of Russia's 
GAZPROM and is building pipelines under the Baltic and Black 
Seas that many fear will increase Europe's dependence on 
Russian energy. ENI has also given Gazprom access to North 
African energy resources (in exchange for increased access to 
Siberian gas fields). The GOI claims to share our concerns 
about overdependence on Russian energy supplies, but in fact 
it seems to take comfort in what it perceives to be its 
special relationship with Russia. 
 
Encouraging Nuclear Energy, Opportunities for U.S. Firms 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
12. (C/NF) The Berlusconi Government tells us it is serious 
about following through on its election promise to re-launch 
the Italian nuclear energy sector within five years, with a 
goal of eventually obtaining up to 25 percent of its energy 
from nuclear power. Italy plans to begin construction of new 
nuclear plants by 2013; actual construction would take at 
least an additional 5-7 years. If the GOI follows through on 
this plan, it will result in tens of billions of dollars in 
commercial contracts. We have already seen high-level 
lobbying by British, French and Russian government leaders, 
all of whom are apparently seeking to ensure that their firms 
participate in this enormous project. There is still time for 
the U.S. to weigh in on Italy's choice of nuclear technology 
partners.  We should engage at the highest levels if we want 
to ensure favorable consideration of U.S. companies and 
protection of U.S. energy security interests. Your meeting 
provides an opportunity to urge Berlusconi to 1) give U.S. 
firms fair consideration and 2) take strategic energy 
security concerns (i.e. Italy's worrisome dependence on 
Russian energy) into consideration when selecting sources of 
nuclear power technology. 
 
 
ROME 00001226  004.2 OF 006 
 
 
Addressing Italian Behavior in Afghanistan 
- - - - - - - - - - - - - - - - - - - - - - 
 
13. (S//NF) The Italians dropped from fourth to sixth largest 
contributor to ISAF in August when they relinquished Regional 
Command -- Capital (RC(C)) to the French.  Italy is now 
consolidating its 2,200 troops in RC-West, which it commands 
and where it has a PRT (Herat), and has sent 34 Carabinieri 
police trainers to Afghanistan at our request. 
Unfortunately, the significance of this contribution has been 
undermined by Italy's growing reputation for avoiding combat 
and paying ransom and protection money.  This reputation is 
based in part on rumors, in part on intelligence which we 
have not been fully able to corroborate.  True or not, the 
fact remains that Italy has lost twelve soldiers in 
Afghanistan -- fewer than most allies with comparable 
responsibilities.  Most of the major combat engagements in 
the Italian command area (RC-West) have been conducted by 
U.S. and Afghan forces.  Indications that we have received 
from COMISAF suggest that Italy's alleged behavior may be 
contributing to strains within ISAF. 
 
14. (S//NF) I have raised this issue with PM Berlusconi in 
the past.  He assured me that he was unaware of any such 
activity and would put a stop to it if he found evidence of 
it.  Although less casualty-averse than his predecessor 
Romano Prodi, Berlusconi is sensitive to the public opinion 
fallout that might result were Italy to incur serious losses 
in Afghanistan.  You should make it clear to him that, while 
we appreciate his willingness to lift geographic caveats and 
to send Carabinieri police trainers, Italy's shaky 
reputation, even if unearned, is undermining its credibility 
within ISAF.  More troublingly, if there is any basis to the 
allegations, Italian actions are endangering allied troops. 
 
Iran 
- - - 
 
15. (C) Berlusconi has brought a new level of rhetorical 
support from Rome for P5 1 efforts.  You will want to thank 
him for Italy's support on recently adopted UNSC Resolution 
1835 and encourage Rome's active engagement within the EU for 
more robust EU sanctions. Beyond implementation of 1803, the 
EU needs to reach consensus on the broadest possible package 
of additional measures. Italy claims that its trade 
relationship with Iran makes sanctions costly domestically, 
but nevertheless the government now supports a firmer line on 
Iran. In spite of differences at the policy level, Italian 
cooperation in efforts to prevent Iranian exploitation of the 
banking system has been good. Italy continues to express 
interest in more frequent and high-level consultations 
regarding the P5 1 and Quint. 
 
16. (C) FM Frattini's recently announced proposal of the 
"coalition of the willing" -- in which EU member states would 
impose selective sanctions based on their trading patterns 
with Iran -- presents additional opportunities for Italy to 
press the EU for more aggressive action.  Examples Frattini 
discussed: the Netherlands could apply sanctions in the 
insurance sector, Austria in the engineering sector, Germany 
and Italy in the natural gas sector. 
 
Lebanon/Syria 
- - - - - - - 
 
17. (C) You will want to thank Italy for its leadership in 
UNIFIL as the single largest troop contributor with 2,300 
troops.  We have been pleased with Italy's leadership in 
UNIFIL and the performance of General Graziano as commander. 
We would like to see more assertive work to address 
provisions of UNSCR 1701, including interdicting arms 
 
ROME 00001226  005.4 OF 006 
 
 
smuggling from Syria and enforcement of the weapons-free zone 
in south Lebanon.  Both the U.S. and Italians are concerned 
by the findings of the recent Lebanon International Border 
Assessment Team, which makes it clear that no progress has 
been made in interdicting arms smuggling from Syria over the 
past two years.  We must continue to encourage Italy to 
explore ways to strengthen UNIFIL, without an expanded 
mandate. 
 
18. (C) Italy recently offered Syria a high-level platform 
when FMs Frattini and al-Moallem met in Rome on September 11 
and Frattini agreed to travel to Damascus in the near future. 
 Italy has not deployed conditions in engaging Damascus (the 
GOI continued to meet at high levels with the SARG even as 
other EU members reduced contacts in the aftermath of the 
Hariri assassination), and has not achieved tangible 
achievements in return.  Berlusconi's visit offers an 
opportunity to stress that Italian engagement needs to be 
conditioned by expectations that Syria meet the benchmarks 
already laid out by Italy and other EU members, namely: 
clearly delineating the Syria-Lebanon border, interdicting 
weapons smugglers entering Lebanon via Syria, and instituting 
full diplomatic relations with Lebanon. 
 
Basing and Security Cooperation 
- - - - - - - - - - - - - - - - 
 
19. (C/NF) Italy remains our most important European ally for 
projecting military power into the Mediterranean, Middle East 
and North Africa.  We have 15,000 U.S. military and DOD 
civilian personnel and 17,000 of their family members on five 
Italian bases.  The GOI has approved the expansion of the 
base at Vicenza to consolidate the 173rd Airborne Brigade, 
the deployment of the USAF Global Hawk UAV in Sicily, and we 
are working with the Italians to stand up the AFRICOM Army 
and Navy Component Commands in Italy.  COESPU (Center of 
Excellence for Stability Police Units), the Carabinieri-led 
peacekeeping training center that you initiated with 
Berlusconi at the G8 Sea Island Summit, has graduated over 
1,600 officers from 14 countries, including police 
peacekeeping units headed to Darfur.  In addition to its 
2,200 troops in Afghanistan, Italy currently has 2,400 in the 
Balkans, 2,300 in Lebanon, and is the leading contributor to 
the NATO Training Mission in Iraq.  Italy has provided USD 
360 million in aid to Iraq since 2003, and has agreed to 
reduce $3 billion in Iraqi Paris Club debt by eighty percent. 
 
Abu Omar Trial Resumes 
- - - - - - - - - - - - 
 
20. (S) Berlusconi has continued to stand with us as best he 
can in the trial of twenty-six Americans and seven Italians, 
including the former chief of Italian military intelligence, 
charged with kidnapping suspected terrorist Mustafa Osama 
Nasr, a/k/a Abu Omar in February 2003.  The Italian 
Government asked the Constitutional Court to annul the 
indictment as it was based on evidence covered by state 
secrecy.  A hearing before the Constitutional Court has been 
postponed until late 2008 or early 2009, but the criminal 
trial is proceeding in Milan.  The 26 Americans are being 
tried in absentia and are being defended by Italian court 
appointed attorneys, with one exception: the Air Force 
retained an Italian attorney to represent the lone U.S. 
serviceman charged in the case, Colonel Romano. 
 
Looking Ahead toward the Italian G8 Presidency 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
21. (C/NF) The Berlusconi government is still in the early 
stages of planning for the G8 summit, with site selection 
still something of an issue.  We are working with our Italian 
 
ROME 00001226  006.2 OF 006 
 
 
contacts to determine GOI priorities.  We expect Berlusconi 
to try to use the summit to ease tensions with Russia.  Italy 
is also considering using the G8 to focus attention on 
Afghanistan and Pakistan, which have risen recently on the 
GOI's radar as priority issues, and to emphasize achievements 
and goals in the area of peacekeeper training, particularly 
given the success of COESPU.   The Italians have also 
indicated that Non-Proliferation may also be a priority. 
With recently announced cuts in Italian foreign assistance, 
we suspect that the Berlusconi government may seek to 
de-emphasize assistance to Africa. 
 
Climate Change 
- - - - - - - - 
 
22. (SBU) Although constrained by EU policy and by its Kyoto 
commitments, Italy usually sees more eye-to-eye with the U.S. 
on climate change than other EU countries.  For example, on 
October 15 Berlusconi will make his case to other EU heads of 
state for changes in the EU's post-Kyoto climate package that 
would ease the burden on Italian industry.  Italy will be 
hosting the second Major Economies (ME) leaders' meeting on 
the margins of the 2009 G8 summit.  You could ask Berlusconi 
to use the Italian G8 Presidency and ME summit to move us 
toward a global climate agreement that the U.S. could sign, 
one that includes commitments for countries like India and 
China. 
 
Conclusion 
- - - - - - 
 
23. (C) This will likely be Berlusconi's last official visit 
to Washington during your administration.  It presents an 
opportunity to strengthen the roots of the many projects that 
you have worked on or launched together -- Iraq, Afghanistan, 
COESPU -- and to obtain his commitment to behave more 
responsibly toward Russia.  It also presents an opportunity 
to stress our continued commitment to Italian prosperity 
through the Partnership for Growth and through possible U.S. 
investment in Italian nuclear power.  Berlusconi sees this 
government, his fourth, as the one that will define his place 
in Italian history.  His partnership with the U.S., and with 
you personally, will be a cornerstone of that legacy. 
SPOGLI