MILAN — Prime Minister Matteo Renzi is expected to vent his frustration at the EU summit Thursday at what he sees as German duplicity about energy policy and sanctions on Russia.
Italian officials claim Berlin is on the one hand demanding unified EU action when it comes to sanctions on Russia for its military takeover of Crimea and parts of eastern Ukraine, but on the other hand acting in its own energy interests. Renzi has resisted a quick extension of the sanctions.
Germany currently receives gas directly from Russia through the Nord Stream pipeline, which bypasses Ukraine and runs beneath the Baltic Sea. The planned Nord Stream 2 would double the gas flows to Germany.
Italy’s opposition stems, in part, from its anger at the cancelation of the South Stream project, a pipeline that was supposed to bring Russian gas to the EU through Southern Europe and into Italy. It was scrapped by Russian President Vladimir Putin a year ago, citing repeated objections from EU competition authorities.
On the eve of the summit, Renzi told Italian radio: “I think sanctions will be revised. Certainly not in the next few days, but in the next few months.”
Rome is Moscow’s second-biggest trading partner in the EU, and sanctions are taking their toll on Italy’s already fragile economy.
“Italy’s statement is to be read as a signal of the country’s frustration towards what it perceives to be German double standards,” said Sijbren de Jong, a strategic analyst at HCSS, the Hague Center for Strategic Studies.
Rome is Moscow’s second-biggest trading partner in the EU, and sanctions are taking their toll on Italy’s already fragile economy. A study by Intesa San Paolo, one of Italy’s biggest banks, found the sanctions had reduced Italian exports by €1.2 billion in 2014 — a cost to the economy which is forecast to be even greater by the end of this year.
“It’s a way to tell Germany that Nord Stream, as well as the current sanctions on Russia, will be on the table for discussion,” said one Italian government source.
An Italian diplomatic source added that Renzi’s reluctance to green-light the sanctions last week were part of a strategy to force the broader debate among EU leaders this week.
“Prime Minister Renzi is going to talk about the issue of renewal and the fact of being coherent in our actions,” the diplomatic source said of the summit. “We’re not going to oppose the sanctions.”
The European Commission has long been concerned about Gazprom’s dominant position in the energy market — a lawsuit is currently pending — and the need to diversify the EU’s gas sources to avoid giving Moscow too much political leverage.
Russia currently provides about 30 percent of Europe’s gas needs, half of which pass through Ukraine.
Italian oil giant Eni, which some media commentators portray as carrying out its own alternative Italian foreign policy, was also disappointed at having to renounce to a chunk of the $29 billion South Stream project.
The company’s importance to the Italian economy — and the government — has been greatly enhanced by its discovery this year of the world’s largest natural gas field off the coast of Egypt, which might help explain Renzi’s adamant opposition to Nord Stream 2.
Renzi will have to strike a delicate balance at this week’s summit. His natural allies in the Nord Stream 2 battle include a group of Eastern European countries whichsent a letter to the Commission asking for the pipeline project to be stopped. This same group of countries, however, will not be willing to make any compromises on relaxing sanctions against Russia.
In the opposite corner, Germany is not the only country with an interest in the new pipeline project, which will involve major oil companies from a bunch of EU countries, including Anglo-Dutch oil concern Shell, Austria’s OMV and France’s Engie.
The balance of power appears to favor North Stream, but Renzi might be able to wring some concessions in return — if not on sanctions, perhaps on his demands for greater flexibility on Italy meeting EU budget rules.
This article was written for Politico Europe