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S E C R E T SECTION 01 OF 05 ROME 001021 
 
NOFORN 
SIPDIS 
 
FOR THE VICE PRESIDENT FROM THE AMBASSADOR 
 
E.O. 12958: DECL: 08/12/2018 
TAGS: PREL PGOV IT
SUBJECT: SCENESETTER FOR THE VICE PRESIDENT'S SEPTEMBER 
4-10 TRIP TO ITALY 
 
ROME 00001...

Classified By: Ambassador Ronald P. Spogli for reasons 1.4 (b) and (d). 
 
¶1. (C/NF) Summary. Mr. Vice President, Silvio Berlusconi's 
government has worked hard over its first months in office to 
regain its position as our best ally in continental Europe. 
Your September 4-10 visit comes as the Berlusconi government 
reconvenes for what promises to be an important legislative 
session.  Although it has a strong electoral mandate, the 
government needs to take decisive steps to revitalize the 
economy and reduce budget deficits.  Your visit presents an 
opportunity to build upon the President's June visit by 
encouraging the Berlusconi government to remain focused on 
much-needed economic and institutional reforms, while 
maintaining the defense capabilities and commitments that are 
essential to bilateral and NATO interests. 
 
¶2. (C/NF) Berlusconi's government has taken pains to work 
with us, but mandatory budget cuts mean we will need to 
coordinate on the specifics.  Berlusconi relaxed geographic 
caveats for Italian ISAF forces, but we are monitoring 
progress on bringing promised police and border guard 
trainers into the field.  Berlusconi and Foreign Minister 
Frattini have been extremely cooperative on Iran, even if 
Italy has not been invited to join the P5 1 as they hoped. 
Coordination has been very good on Lebanon and Israel, though 
we have not yet made the same type of progress on 
trans-Atlantic relations with Russia. You will also be 
meeting President Giorgio Napolitano, who continues to 
exercise his authority with conscientiousness and to be a 
stabilizing force in the government -- even when it makes him 
unpopular among his colleagues on the center-left. End 
Summary. 
 
Berlusconi Government Embarks on Challenging Autumn 
- - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶3. (C/NF) Over his first hundred days in office, Berlusconi 
delivered concrete results on election promises.  His 
coalition's solid majorities in both chambers of parliament 
allowed the swift adoption of wide-ranging laws on domestic 
security and the budget.  Berlusconi intends to pass 
significant judicial reforms and devolve more fiscal powers 
to the regions between now and the end of the year. 
Politicians of all stripes agree that deep institutional 
reform is essential.  But initial hopes of cross-aisle 
cooperation have faded, as the weakened opposition has 
signaled its intent to protest budget cuts and changes to the 
dysfunctional and deeply politicized judicial system. 
 
An Ally in Economic Decline -- We Can Help Change This 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶4. (SBU) A G8 member and one of the world's largest 
economies, Italy's influence is threatened by perennially 
slow economic growth. Its economy has grown a full percentage 
point slower than the EU 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 - a condition that 
bedeviled both the Prodi government and the Berlusconi 
government that preceded it. The slow growth that results 
from this mess seriously threatens Italy's ability to be the 
kind of ""boots on the ground"" ally that we want it to be. 
 
¶5. (U) 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. 
Through our Fulbright Business Exchange and Student Training 
(BEST) scholarship program we send young Italian 
scientist-entrepreneurs to Silicon Valley for six months of 
total immersion in the U.S. entrepreneurial environment. They 
come back energized, ready to do in their country what we 
have done in ours. Of particular note, almost all costs are 
covered by donations from Italian companies. We have also 
brought many of the top minds in U.S. innovation to Italy, to 
share their ideas on how countries can make progress. We have 
created dozens of new, web-based avenues for communication 
and idea-sharing between the U.S. and Italy. And through more 
than 200 events over the last two years, we have made the 
Italian elite understand what needs to be done to put their 
country on the path to prosperity. 
 
¶6. (U) We have made tremendous progress. 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. 
 
Maintaining a Common Stand on Iran 
- - - - - - - - - - - - - - - - - - 
 
¶7. (S/NF) We have made great advances in moving Italy solidly 
into our camp on Iran.  The Berlusconi government has 
cooperated fully on EU efforts to apply additional financial 
measures against Tehran, despite Italy's disappointment with 
not being included in the P5-plus-1.  Their concerns have 
been eased somewhat by Quint pre-meeting consultations, but 
they worry that this mechanism is too informal and ad hoc to 
keep them properly informed.  Italian adherence to sanctions 
has always been complicated by their substantial commercial 
interests in Iran, but we will continue to monitor their 
economic activities and discourage further energy sector 
investments. Sustaining Italian support for sanctions and the 
P5-plus-1 negotiations may depend on keeping up early and 
high-level dialogue. 
 
Not Seeing Eye-To-Eye on Russia 
- - - - - - - - - - - - - - - - 
 
¶8. (S/NF) Italy's relationship with Russia could become a 
point of friction if Italy continues to insist that Russia's 
demands on Kosovo, Georgia, Ukraine and Missile Defense get a 
fair hearing in transatlantic and international fora.  We 
have advised them that taking a soft line on Russian actions 
against Georgia could damage their credibility.  We have also 
become concerned by a growing sympathy for Medvedev's calls 
for a new security framework to supersede NATO, OSCE, and 
CFE. You can let Berlusconi know that public endorsement of 
Russia's plans only serves to weaken the alliance. 
 
¶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. 
 
Need for Energy Diversification 
- - - - - - - - - - - - - - - - 
 
¶10. (C/NF) Compared to EU countries further north, Italy is 
less dependent on Russia for energy, especially natural gas. 
Geography gives Italy access to more resources than other EU 
countries, including North African energy. There are already 
natural gas pipelines from Libya and Algeria to Italy.  An 
Algeria-Sardinia-Italy pipeline is being planned.  While 
Italy's North African connections seem to be good news in 
terms of energy security, ENI has recently given Gazprom 
access to North African energy resources, in exchange for 
increased access to Siberian gas fields.  Italy hopes to make 
increased use of Liquid Natural Gas, but local environmental 
concerns have slowed the construction of regasification 
plants. The GOI claims to share our concerns, but in fact 
takes comfort in what it perceives to be its special 
relationship with Russia.  Italy's largest energy company 
(ENI -- one-third owned by the GOI) is now a major partner of 
Russia's Gazprom, and is building strategically important 
pipelines for Gazprom in both the Black Sea and the Baltic. 
Many believe that ENI actions in furtherance of its own 
commercial goals are also helping Russia tighten its grip on 
Western Europe's energy supply. 
 
¶11. (C/NF) At the same time, Italy is taking steps to 
diversify its sources of energy.  Italy, through the Edison 
Company, is a key player in the Turkey-Greece-Italy (TGI) 
pipeline.  The availability of Azeri natural gas is a key 
concern, and the EU's Nabbucco pipeline is sometimes seen by 
the Italians as a competitor for this gas.  Reports that 
Russia is courting Azerbaijan in an attempt to buy all of 
their gas is a major concern for Italy, since it would mean 
the end of TGI. 
 
Basing and Security Cooperation: 
A Cornerstone of the Relationship 
- - - - - - - - - - - - - - - - - 
 
¶12. (C/NF) Italy remains our most important European ally for 
projecting military power into the Mediterranean, Middle East 
and North Africa. We have 14,000 U.S. military and DOD 
civilian personnel and 16,000 of their family members on five 
Italian bases. The GOI has approved the expansion of the base 
at Vicenza to consolidate the 173rd Airborne and the 
deployment of the USAF Global Hawk UAV in Sicily.  Legal 
challenges to the Vicenza expansion have been dismissed, and 
both projects are on track. COESPU (Center of Excellence for 
Stability Police Units), the peacekeeping training center, 
has graduated over 1,600 officers from 14 countries and has 
just finished training peacekeepers headed to Darfur.  We are 
now in discussions on locating component commands for AFRICOM 
and Italy has signaled that it would like to host the overall 
HQ. 
 
Seeking Follow-Through in Afghanistan 
- - - - - - - - - - - - - - - - - - - 
 
¶13. (C/NF) During the President's June visit, Berlusconi 
agreed to loosen geographic caveats on Italian ISAF troops 
and to send approximately 30 additional Carabinieri trainers 
to support the ANCOP program. Control of Kabul has passed 
from Italy to France, and Italy intends to transfer a portion 
of their 1,200 Kabul-based troops to the Herat district. 
Because of budget constraints and large troop commitments in 
Lebanon and the Balkans, Italy is likely to reduce the number 
of troops stationed in Afghanistan. We would like to see 
Italy maintain as many troops as possible in Afghanistan and 
to provide more security training and military hardware. 
 
Stronger Support for Israel 
- - - - - - - - - - - - - - 
 
¶14. (C/NF) Berlusconi and Frattini proudly and publicly 
declare their support for Israel, refuse to consider Hamas a 
potentially constructive partner, and support the formation 
of an independent, democratic Palestinian state.  Frattini 
pledged additional aid to train and equip Palestinian police, 
but was unable to do so due to budgetary constraints. 
 
Lebanon and Syria: Consultation and Cooperation 
- - - - - - - - - - - - - - - - - - - - - - - - 
 
¶15. (C) Italy has consistently offered political, financial 
and military support to Lebanon, and is the single largest 
contributor of troops to UNIFIL (over 2,500), which is 
currently under the command of an Italian general. 
Berlusconi pledged to maintain and strengthen UNIFIL and FM 
Frattini joined his Spanish and German counterparts in 
calling for Syria to halt its uncooperative approach to 
Lebanon.  You can encourage Italy to maintain this 
engagement, and to join in our efforts to improve security 
along the Lebanon-Syria border. 
 
Expanding Military Cooperation In the Face of Budget Cuts 
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - 
 
¶16. (C/NF) The Italian MOD signaled that because of budget 
constraints, it may not meet its commitment to pay for 300 
flight hours in the NATO SAC C-17 program.  After 
considerable pressure from SECDEF, the NATO SYG and myself, 
Italy agreed to postpone their decision until December.  We 
are, however, encouraging them to confirm their participation 
by mid-September.  Your visit is an excellent opportunity to 
remind them of the importance of this program to the Alliance. 
 
¶17. (C) Berlusconi is likely to ask for your help on 
Finmeccanica's acquisition of U.S. defense contractor DRS 
Technologies, a deal worth $5.2 billion.  The Italian 
government would like to see DRS obtain a Special Security 
Agreement from DOD, and will encourage a favorable decision 
by the CFIUS.  A recent announcement of intentions by 
Finmeccanica and Russian Technologies, a Russian para-statal 
industrial and defense conglomerate, to enter into a 
cooperation agreement has raised some red flags by CFIUS. 
Berlusconi may mention Italy's contributions (2 billion 
euros) to the Joint Strike Fighter program.  He may also 
express interest in the USAF Tanker program rebid; the 
Italian firm Alenia Aeronautica has partnered with Boeing on 
the KC767. 
 
President Napolitano Has Limited Power, 
Considerable Influence 
- - - - - - - - - - - - - - - - - - - - 
 
¶18. (C) You will also be meeting with President Giorgio 
Napolitano. Although his constitutional powers are limited, 
Napolitano exercises his authority evenhandedly, evidenced by 
the praise and criticism he receives from both the political 
left and right.  During the collapse of the Prodi government 
in January 2008, Napolitano was a calming presence in the 
midst of a political maelstrom.  Since Berlusconi took 
office, Napolitano -- whose roots are in the former Communist 
Party -- has been careful to tread a legally sound middle 
ground.  He signed the controversial immunity law because it 
avoids the problems in earlier similar legislation, but also 
warned the Berlusconi government not to abuse its decree 
powers and instead to hold full debates on new legislation in 
Parliament.  President Napolitano's seven-year term expires 
in 2013. 
 
Comment 
- - - -  
 
 
¶19. (C/NF) Mr. Vice President, Italy has great potential to 
become an even closer partner and ally in addressing some of 
our most important global interests.  But the country is at a 
critical juncture, and could be faced with institutional and 
economic failure if difficult domestic choices are not made. 
Italy's ability to partner with the U.S. will depend above 
all on the revival of its economy.  Your discussions with 
Berlusconi and key leaders can help this administration to 
maintain focus and direction on international issues at a 
point when their interests could be completely absorbed by 
domestic concerns. 
 
¶20. (U) We are pleased that you are coming to Italy at this 
time.  I am certain that your visit will make an already 
robust relationship even stronger. 
SPOGLI