Feb. 23 (Bloomberg) -- In his pursuit of business with North Africa’s longest-serving dictator, Italian Prime Minister Silvio Berlusconi let Muammar Qaddafi pitch his tent in the heart of Rome.
Berlusconi shut down the city’s biggest park in June 2009 to allow the visiting Libyan leader and his entourage of all-female bodyguards to set up camp by the 16th-century Villa Doria Pamphili. A year earlier, Italy agreed to pay $5 billion over 25 years to its former colony in reparations.
“With hindsight, the more slavish manifestations of deference could have been avoided,” Franco Pavoncello, a politics professor at John Cabot University in Rome, said by phone. “He went out of his way, more than others, to be best friends with Qaddafi. He can’t exactly take it all back now.”
Libya has invested in Italian companies including Fiat SpA and UniCredit SpA and the Juventus soccer team, while Eni SpA has been present in the North African country for half a century, leaving Italy reliant on Libya for a quarter of its crude oil. As his ties with Qaddafi developed, Berlusconi built on that economic legacy, which is now unraveling and underscores the cost of doing business with autocratic regimes.
“There will be a negative impact for Italian companies,” which risk losing 4 billion euros ($5.5 billion) in infrastructure projects in Libya, Foreign Minister Franco Frattini said in parliament today.
Eni said the supply of gas to the Italian island of Sicily through its Greenstream pipeline under the Mediterranean Sea was temporarily suspended yesterday after some of the company’s activities in Libya were disrupted. UniCredit said the same day it plans to make a decision on voting rights by Libyan investors after a “careful review.”
Juventus Football Club SpA said it’s unclear what will happen to the 7.5 percent stake in the Turin soccer team held by Libya’s state-owned investment company amid continuing political unrest in the North African nation.
Berlusconi spoke with Qaddafi by phone yesterday, the premier’s office said in an e-mailed statement. He urged the Libyan leader to avoid bloodshed and bring a peaceful end to the conflict, newspaper Corriere della Sera reported today. Qaddafi yesterday said he will fight with his “last drop of blood” to retain power and pledged to deploy the army and police today to impose order.
Roman ruins along the Mediterranean are a reminder that Italy’s ties to Libya date back to antiquity. The town of Leptis Magna, the birthplace of Emperor Septimius Severus in 145, was developed as an archaeological site under Fascist dictator Benito Mussolini in the 1920s. Today it’s a major tourist attraction.
To strengthen ties with the oil-rich former colony, Berlusconi led a succession of world leaders willing to put Libya’s past as a sponsor of terrorism and a developer of nuclear weapons behind them and go into business with Qaddafi, a man Ronald Reagan called the “mad dog of the Middle East.”
Former U.K. Prime Minister Tony Blair and former German Chancellor Gerhard Schroeder visited Libya in search of contracts when in office. Qaddafi traveled to Paris in 2007 to meet with President Nicolas Sarkozy.
At a dinner at the 2009 Group of Eight summit in L’Aquila, Italy, Berlusconi reshuffled the seating arrangements to put Qaddafi to his left and President Barack Obama to his right, forcing a handshake between the two, according to an Italian official present at the event.
The Italian premier ignored U.S. and U.K. criticism and went ahead with a visit to Tripoli in August 2009, days after convicted Lockerbie bomber Abdel Basset Ali al-Megrahi, freed from a Scottish prison on medical grounds, was welcomed by cheering crowds.
“For years he boasted about his special relationship with Qaddafi,” Dario Franceschini, a leader of the Democratic Party, the main opposition to Berlusconi, told reporters in Rome on Feb. 1. “We’d love for him to tap that now and stop the bloodshed.”
Now Berlusconi is faced with the prospect of a flood of Libyans seeking to escape the violence. As part of the reparation deal, Qaddafi agreed to tighten border controls, which led to the number of Libyan migrants to Italy falling to less than 3,000 last year from a record 37,000 in 2008, according to the Interior Ministry.
As many as 350,000 of the 2 million migrant workers now in Libya may seek to escape the turmoil and head to Italy, Cyprus, Malta and Greece, Frattini said today.
Slow to Criticize
As the first reports of civil unrest began to filter through from Libya this month, Berlusconi was reluctant to criticize his ally. The premier said on Feb. 19, four days after anti-government protests began, that he didn’t want to “disturb” Qaddafi and hadn’t called him.
He eventually put out a late-night statement on Feb. 21 in which he condemned the “unacceptable” use of force by the military regime to suppress protests and called for a common effort “to prevent the Libyan crisis from degenerating into a civil war that will have consequences difficult to predict.”
Shares in Rome-based Eni, the biggest foreign energy company in Libya, dropped for a third day today and have lost almost 7 percent since the violence escalated this week. Italy is the European Union country that does most trade with Libya, and the Milan-based FTSE MIB index has declined for four days.
Eni in Libya
Eni gets about 14 percent of its 98 billion euros of annual revenue from Libya and has committed itself to $25 billion of investment there in the next decade.
“Italy has lots of interests in Libya, primarily linked to Eni,” said Nicolo Sartori, an analyst who specializes in energy policy at Rome’s IAI institute of international affairs. “These ties have become even tighter recently with the Berlusconi-Qaddafi bilateral pacts.”
The 2009 friendship treaty signed by the two leaders at a ceremony in Tripoli stipulated that Italy would build a Libyan coastal highway. Contracts for the projects were to go to Italian infrastructure companies such as Impregilo SpA and Ansaldo STS SpA.
“As Qaddafi’s regime unravels, Italy’s close links to Libya, which have been the case for a number of years, came back to haunt it,” Ope Adewale, a Milan-based Mediobanca SpA analyst, said in a note to investors yesterday.
Moreover, Berlusconi signed a treaty that limits his ability to respond to what his own top diplomat today defined a “bloodbath” that has killed more than 1,000 people.
According to Article 4, the treaty says Italy and Libya “should abstain from any form of direct or indirect interference in the internal or external affairs that fall under the jurisdiction of either side, in line with the spirit of good neighbors.”
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