By Cinzia Bianco and Giorgio Cafiero (source: LobeLog)
photo by Islamic Republic News Agency
When Iran’s President Hassan Rouhani visited Rome last month, Italian and Iranian officials and businessmen signed $22 billion worth of deals in sectors ranging from energy to infrastructure, steel, and shipbuilding. Rouhani’s “charm offensive” in Europe, which also included stops in the Vatican and France, marked his first trip overseas following the nuclear deal’s Implementation Day as well as the first visit of an Iranian president to the continent in 16 years.
Rouhani’s trip to Europe was clearly aimed at capitalizing on new opportunities to bring the Islamic Republic out of international isolation, following the crippling sanctions imposed by global powers nearly a decade ago. Yet analysts have questioned why Rouhani visited Rome first. After all, Italy is a less significant actor in the global economy than France or Germany, and Rome was not a party to the P5+1 talks with Iran.
The main reason might be that Iran has long viewed Italy as one of its closest partners in the West. President Rouhani has often stated that Italy represents Iran’s gateway to Europe. Officials in Tehran even pleaded for Italy to join the P5+1 throughout the nuclear negotiations, highlighting how Italian-Iranian relations have been founded on greater trust than Iran’s relationship with other Western nations. This somewhat privileged relationship dates back to the 1950s, when Enrico Mattei (then-president and founder of the Italian energy giant ENI) created an unprecedented partnership with the National Iranian Oil Company, which greatly contributed to Iran’s national economic development.
Today, as then, Iran is looking for a genuine partner on its uncertain path toward economic development. Despite the signing of the nuclear agreement, a host of issues-including the uncertainty of the upcoming presidential election in America, escalating tensions between Iran and its regional rival Saudi Arabia, and the Iranian Revolutionary Guard Corps (IRGC)’s actions throughout the Middle East-complicate the prospects for a substantial improvement in West-Iran relations.
Iran needs friendlier countries in its corner to overcome these obstacles. For example, officials in Tehran recognize the wariness on the part of major multinational financial institutions such as Credit Suisse and Barclays, which U.S. regulators previously punished for violating the terms of sanctions on Iran, to do business with the Islamic Republic. While in Europe, Rouhani discussed the possibility of reaching deals with medium-size Italian (and French) banks to bypass this issue. Yet a closer examination reveals that Italian-Iranian relations go beyond this matter.
Throughout modern history, Italy and Iran have maintained close economic relations. Italian firms remained quite active in Iran’s economy until the international sanctions regime began to tighten around Tehran several years ago. By 2011, Italian-Iranian trade had peaked at $7.66 billion. The volume of “triangulated exports” via Turkey and Dubai was also significant. Although bilateral trade was somewhat diverse, the main source of Italian-Iranian economic cooperation was in the energy sector. Iran played an important role in Italy’s energy consumption (exporting seven percent of its crude oil to Italy), particularly as geopolitical instability in North Africa and the Ukrainian crisis pressured Rome to find new gas providers as alternatives to Libya and Russia.
However, the financial and commercial sanctions on Iran, which the European Union implemented in 2012, damaged Italian-Iranian exchanges significantly. (In 2013 and 2014 the volume of the trade exchange decreased by 24.3 and 22.6 percent, respectively). Having maintained a longstanding presence in Iran’s petrochemical, steel, mining, automotive, and machinery sectors, Italian firms found it quite onerous to comply with sanctions.
At this juncture, major Italian companies are ready to go back to business in the Islamic Republic. Moreover, Italians view exports as a means of emerging from their dismal economic conditions and achieving growth.
While Rouhani was in Rome, several major Italian firms signed substantial contracts. Danieli signed a $6.2 billion contract to provide Iran with heavy machinery and equipment for steel production. Saipem secured a $3.8 billion contract to revamp and upgrade two Iranian oil refineries-Pars Shiraz and Tabriz. Vinci landed a deal to develop a terminal at the Shahid Hashemi Nejad airport in Mashhad. Fincantieri SpA and Gavio SpA also signed deals for major shipbuilding operations and infrastructural transportation projects. Other important Italian firms eyeing a return to Iran include Alitalia in the logistics sector, Snamprogetti and Tecnimont SpA for the construction of auxiliary infrastructures for petrochemical complexes, Telecom Italia SpA for telecommunications, and Ansaldo Energia SpA for power plants.
The Future of Italian-Iranian Relations
When Rouhani arrived at the Palazzo del Quirinale last month, a national guard greeted the Iranian president. The Italian authorities went to great pains to demonstrate respect for his conservative country’s norms by covering the nude statutes in Rome’s Capitoline museum. In talks with their Italian counterparts, Iranian officials also addressed the Middle East’s ever-worsening security crises, where the two governments see common ground. Italy’s Prime Minister Matteo Renzi stood next to Rouhani and called on Tehran and Rome to jointly confront the “evil” Islamic State.
Yet Italy’s important post-World War II strategic alliance with the U.S., its strong bond with Israel, and growing partnerships with the Gulf Cooperation Council members complicate the prospects for any further deepening of Italian-Iranian relations. Although Washington has lifted nuclear-related sanctions on Iran, the U.S. government has kept other measures regarding ballistic missiles, terrorism, and human rights in place. Israel and Saudi Arabia are going to great lengths to make things harder for Tehran in the West.
Despite such complications, there is good reason to expect Italy to play a lead role in terms of advancing constructive discourse between Iran and the West. President Mahmood Khatami’s visit to Rome in 1999 marked the first visit of a president of the Islamic Republic to the European continent. In early 2014, shortly after global powers and Iran agreed to the interim nuclear deal, Italy’s Foreign Minister Emma Bonino was the first European foreign minister to visit the Islamic Republic since Khatami left office in 2005. Soon after Bonino’s trip to Tehran, more than 17 foreign ministers from Europe visited Iran. Last year, Federica Mogherini, as the EU foreign policy chief, firmly supported the nuclear negotiations. In the immediate aftermath of the P5+1 and Iran reaching the Joint Comprehensive Plan of Action (JCPOA) she wrote that the watershed deal opened the door for Western powers and Iran to join efforts to resolve the Middle East’s host of conflicts, ranging from Syria to Yemen.
Beyond the commercial, diplomatic, energy, and security spheres, there are cultural bonds between Italy and Iran. As representatives of two ancient civilizations, the Italians and Iranians maintain ties that rest on academic, artistic, historical, literary, and archeological affinities. Today, as Pope Francis promotes Islamic-Christian dialogues, Iran is likely to value Italy and the Vatican as important partners at a juncture in history in which Iran and the West explore a more normalized relationship.
Perhaps for this reason Tehran has reached out to Rome, its “gateway to Europe,” recognizing that Italy has the potential to play an important role in bringing Iran out of political and economic isolation.
About the author: Cinzia Bianco is a Gulf State Analytics analyst and a regulator contributor to the NATO Defense College Foundation and the Euro-Gulf Information Center. Giorgio Cafiero is the CEO and founder of Gulf State Analytics.
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