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EXPLAINED: How Italy could be affected by the Russian invasion of Ukraine

What is Italy’s relationship with Russia in general?

Despite the geographical distance between Italy and Russia, the two countries have long had a relatively close relationship, with some analysts suggest Italy is Russia’s “greatest European friend”.

Italy has traditionally had friendlier ties to Putin than many other Western countries, supported by strong business relationships – mainly investments by Italian companies in Russia. State-controlled energy group Eni has long-term gas contracts with Russia and agreements with oil group Rosneft, which are on hold.

As the crisis in Ukraine worsened, Russian President Vladimir Putin held a video call with heads of major Italian energy companies earlier in February, reportedly stressing the importance of their ties.

The Italian government found the meeting inappropriate and asked energy bosses not to attend, although many still did, including the head of state-backed Italian energy company Enel.

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In the Ukraine crisis of 2014-2015, such business ties were a key factor in Rome’s push to avoid harsh EU sanctions against Russia under Matteo Renzi’s government.

In addition to business ties, there have long been close relations between Russia and key political forces in Italy.

Russian President Vladimir Putin meets former Italian Prime Minister Silvio Berlusconi in Rome in 2019. Photo by Alexey DRUZHININ / SPUTNIK / AFP

Prominent examples of those ties are the famously close and long lasting friendship between Putin and disgraced former Italian Prime Minister Silvio Berlusconi, while the far-right League party leader Matteo Salvini has often expressed his admiration for the Russian president and repeatedly called for an end on previous EU sanctions against Moscow.

But political analysts say Italy’s stance on Russia is increasingly similar to that of Germany and other major EU powers under the current government since Mario Draghi, former head of the European Central Bank, became prime minister in February 2021.

PROFILE: Who is Italian Prime Minister Mario Draghi?

While Berlusconi, Salvini and other Italian political forces believed to be sympathetic to Russian interests continue to be influential as part of Italy’s current broad coalition government, the Prime Minister himself has repeatedly emphasized Italy’s obligations to the EU and NATO. .

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What did Prime Minister Mario Draghi say?

Draghi immediately condemned the Russian attack on Ukraine on Thursday morning, described it as “unjustified and unjustifiable”.

Later on Thursday, Draghi demanded that Russia “unconditionally withdraw” from Ukraine, saying the pro-Western nation’s invasion “affects us all, our lives as free people, our democracy”.

He added that Rome was strengthening its “contribution to military deployment in all of the most directly exposed allied countries”.

ALSO READ: Italy condemns Russian invasion of Ukraine and calls for ambassador

Draghi has been criticized in some quarters for appearing lukewarm about Western sanctions against Russia, especially after saying Friday that they should not be applied to energy imports.

He was unusually pronounced last month by downplaying the risk of a Russian invasion of Ukraine, but he also made it clear that Italy’s place in NATO takes precedence over friendly relations with the Kremlin.

Italian Prime Minister Mario Draghi delivers a speech in Rome on February 24 after Russian troops invaded Ukraine. Photo by Remo Casilli / POOL / AFP

On Thursday, Draghi said Italy was “fully aligned” with its partners and would decide “on a very tough package of sanctions against Russia,” AFP reports.

“We have made it clear in every forum that we are ready to impose serious consequences if Russia … rejects our attempts to solve the crisis through political means. Now is the time to apply them.”

Rome would “do whatever it takes to preserve Ukraine’s sovereignty, Europe’s security and the integrity of the international order based on the rules and values ​​we all share,” he said.

How will the Italian economy be affected?

Gas prices are the most obvious cause for concern in a country as heavily reliant on imports as Italy.

Italy is more dependent on natural gas for energy than most of its European neighbors, importing 90 percent of its gas supply, according to Reuters, while Russia supplies about 40 percent.

As in the rest of Europe, consumers and businesses in Italy are already struggling after one series of sharp price increases last year, fueled by the rising price of natural gas.

However, analysts are pointing that the cost of energy in Europe will be less of a concern as it moves into the summer months. If the conflict continues into winter, the scenario may be different.

Italy is an important export market for Russian energy giant Gazprom. Photo by Kirill KUDRYAVTSEV / AFP

Food prices are also likely to be affected in Italy, which imports much of its wheat and maize.

“The war is exacerbating the problems of the national agricultural sector, which is already suffering from the effects of price volatility,” the agricultural association Coldiretti said on Thursday.

Agricultural commodities tend to be much less volatile than stocks or oil, but have seen spectacular peaks and troughs of late as a result of the looming Russian invasion of Ukraine.

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The stakes are especially high for wheat, with Russia being the world’s largest exporter and Ukraine the fourth according to estimates by the United States Department of Agriculture (USDA).

But the consequences for the agricultural markets of the Russian invasion of Ukraine on Thursday are still difficult to predict.

“It’s totally unprecedented,” Sebastien Poncelet, an analyst at French consultancy Agritel, told AFP.

“If we see that there are explosions in Odessa, the main Ukrainian port, we have to assume that not much grain will be loaded today,” he said.

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