Libya's Relationship With Italy Expected to Survive Regime Change

Significantly, the spa deal began with a personal effort by Colonel Qadhafi (conducted alongside the Italian PM, Silvio Berlusconi, who has cultivated close ties with the deposed leader) and was, according to Italian sources, being managed by the Libyan Investment Authority (LIA), whose multibillion dollar assets were frozen several months ago. These assets include stakes in UniCredit, Italy's largest bank (whose largest foreign owner was, until recently, the Libyan government); Eni, the state energy company that produces the lion's share (60%) of Libya's oil exports; and Finmeccanica, a partly government-owned conglomerate with interests in Libya ranging from infrastructure to defense. The regime also had smaller stakes in various Italian sports, automotive, media and telecom interests - and was reported to be eying another, even larger, resort project in the Italian spa town of Fiuggi (so the Colonel would have a choice of resorts, presumably). [Alessandro Profumo] left Unicredit in September 2010 partly because of controversy surrounding the LIA. At that time, the LIA had purchased a 2.6% stake in UniCredit, alongside the purchase of a 5% stake by the Libyan Central Bank, making the Libyan government, through these agencies, UniCredit's largest stakeholder. According to the Financial Times, Profumo's decision to not announce this to shareholders "triggered" his removal, especially because some of Berlusconi's political allies in the ultranationalist Northern League objected to "Arab" investment in Italy on (xenophobic) principle. UniCredit did not renege on the deal with the Libyan Central Bank and LIA, but did freeze their assets at UniCredit several months ago. Now the Italian government (in addition to most EU governments) are pressing for the funds to be unfrozen and given to the NTC for reconstruction purposes. Eni, the biggest oil major in Libya, draws 13% of its total revenue from its Libyan operations and has been moving quickly to restart and shore up its operations in Libya, which were halted in February 2011. Despite its formerly close ties with [Qadhafi], it moved to establish ties with the NTC as the fighting intensified. The NTC has, in turn, signaled it willingness to adhere to preexisting export agreements with Italy (the revenues from those agreements make up 95% of Libya's foreign revenue receipts), and is now depending on Eni, and the French firm Total SA, to get oil production up and running again. As Italy's Foreign Minister put it,