Macho Friends: Washington Concerned about Berlusconi-Putin Axis

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XXXXXX: Redacted by the editors. Important note on the dispatches...

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Ref: a) 08 state 134386 b) rome 451

Classified By: Ronald P. Spogli, Ambassador, for reasons 1.4 (b), (d).

1. (U) This is a joint Political and Economic Section cable.

2. (C/NF) Summary. Italy's relationship with Russia is complex, encompassing historical ideological sympathies, geostrategic calculations, commercial pressure, energy dependence, and personal relationships between top leaders. The combination of these factors creates a strong tendency for Italy's foreign policy to be highly receptive to Russian efforts to gain greater political influence in the EU and to support Russia's efforts to dilute American security interests in Europe. In its relationship with Russia, energy is the most important bilateral issue and the quest for stable energy supplies from Russia frequently forces Italy to compromise on security and political issues. A not insignificant concomitant factor is PM Berlusconi's desire to be seen as an important European player on foreign policy, leading him to go where others dare not. End summary.

Roots of Italian Russophilia: Ideology on the Left, a Long-Standing Market Opportunity on the Right - - - - - - - - - - - - - - - - - - - - - - - - - -

3. (C/NF) Until the 2008 parliamentary elections, the Italian Communist party and various leftist splinter groups were a permanent fixture of the Italian political scene. Throughout the Cold War members of the Italian communist movement maintained close ties with the Soviet Union, other communist countries, and many communist revolutionary movements. Unlike many other communist parties around the world, the Italian communist movement remained unapologetic in its continued belief in Marxism-Leninism as a viable economic alternative to capitalism. While many European leftist intellectuals recognize that -- aside from an authoritarian approach to governing - - Putin's Russia bears little resemblance to Communist ideals, this fact has not deterred Italian communists and other radical left politicians from being openly pro-Russia on the basis of ideological solidarity. This, combined with the advanced average age o most high-level Italian politicians (65-70), prevents many in the far left of Italy's political spectrum from moving beyond a worldview developed (and apparently frozen) during the Cold War.

4. (C/NF) Throughout the Cold War, Italian business interests frequently skirted the line of what was appropriate in their pursuit of the Soviet market. After the collapse of the Soviet Union, the explosion of consumer wealth in Russia created massive deman for high-end and luxury Italian exports. From 1998 to 2007 Italian exports to Russia grew by 230 percent, from 2.7 billion Euros to 9.5 Billion. Many of Italy's leading businessmen began to see Russia as a limitless market that could substitute for loss of export revenue from other parts of the world. These businessmen maintain strong ties to the pro-business, free-market-oriented politicians on the right, including the most visible patron of Italy's business elite: PM Silvio Berlusconi.

Putin Most Influential Figure in Italy's Russia Policy - - - - - - - - - - - - - - - - - - - - -- - - - - - -

5. (C/NF) While Italy's political parties, the MFA and ENI exert some influence on Italy's Russia policy, by far the most importan factor is the personal attention Putin devotes to the relationship. By our reckoning, Putin has held more bilateral meetings with sitting Italian PMs in the recent past than any other world leader. He was the first world leader to meet with Berlusconi after the 2008 elections, arriving in Sardegna to visit the PM designate before the latter had even been sworn in. Berlusconi believes that Putin is his close and personal friend and continues to have more contact with Putin than with any other world leader. During the Georgi crisis, Berlusconi spoke to Putin on a daily basis for a period of almost a week. The basis of the friendship is hard to determine, but many interlocutors have told us that Berlusconi believes that Putin, a fellow 'tycoon', trusts Berlusconi more than other European leader. (A contact in the PM's office told us that their frequent meetings are accompanied by exchanges of lavish gifts). Berlusconi admires Putin's macho, decisive, and authoritarian governing style, which the Italian PM believes matches his own. From the Russian side, it appears that Putin has devoted much energy to developing Berlusconi's trust.

6. (S/NF) Contacts in both the opposition center-left PD

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party and Berlusconi's own PdL party, however, have hinted at a more nefarious connection. They believe that Berlusconi and his cronies are profiting personally and handsomely from many of the energy deals between Italy and Russia. The Georgian ambassador in Rome has told us that the GOG believes Putin has promised Berlusconi a percentage of profits from any pipelines developed by Gazprom in coordination with ENI. Whenever we raise the issue of Russia and the P with our contacts in PdL, Berlusconi's own party, they have usually pointed us to Valentino Valentini, a member of parliament and somewhat shadowy figure who operates as Berluscon's key man on Russia, albeit with no staff or even a secretary. Valentini, a Russian-speaker who travels to Russia several times per month, frequently appears at Berlusconi's side when he meets other world leaders. What he does in Moscow during his frequent visits is unclear but he is widely rumored to be looking after Berlusconi's business interests in Russia. Our contacts uniformly deem Valentini, a multilingual former interpreter, close to Berlusconi with regard to Russia, but not a polic person.

7. (C/NF) All of our interlocutors - xxxxxxxxxxxx - report that Berlusconi determines Italy's policy on Russia single-handedly, neither seeking nor accepting counsel. Virtually all are reluctant to confront the PM even when he is at his worst on Russia. In November 2008, after a disastrous press conference in which, inter alia, the PM described NATO expansion, recognition of Kosovo's independence, and missile defense as "U.S. provocations" of Russia, GOI officials did a classic duck- and-cover. In response to our objections, MFA and PM staff sheepishly directed us to the PM himself, rather than deliver the unpleasant news to him that he had angered not only the Americans but other members of the Contact Group for the Balkans, not t mention the Czechs and Poles. Even FM Frattini admits to wielding no influence on Berlusconi on Russia. During an early September visit to Italy, former VP Cheney confronted Frattini on Italy's very public and unhelpful stance on the Georgia conflict. A subdued Frattini noted that, while he had strong opinions on the issue, he nevertheless received his marching orders from the PM.

8. (C/NF) Distressingly, Berlusconi treats Russia policy as he does his domestic political affairs - tactically and day-to-day. His overwhelming desire is to remain in Putin's good graces, and he has frequently voiced opinions and declarations that have been passed to him directly by Putin. One such example: in the aftermath of the Georgia crisis, Berlusconi began (and continues) to insist that Georgia was the aggressor and that the GOG was responsible for several hundred civilian deaths in South Ossetia.

No Institutional Leadership on Russia - - - - - - - - - - - - - - - - - - -

9. (C/NF) Trying to determine who might have some influence on Berlusconi's Russia policy is not an easy task. One thing is certain, however - it is not the foreign policy institutions of the GOI. FM Frattini is widely seen as only the messenger for PM Berlusconi's Russia policy - indeed he termed himself as much to VP Cheney during the latter's September 2008 visit to Rome. Within the professional ranks, resources and expertise are scant. Italy's MFA contains only one full-time diplomat assigned to cover Russia and the countries of the former Soviet Union: the Office Director. The Deputy Office Director position and single Desk Officer position assigned to cover all the countries of the FSU are vacant. Italy's dire budget situation is likely to prevent the hiring of additional staff at the MFA for at least two years, according to one MF source. The Office Director's direct supervisor - the A/S equivalent - is also responsible for the Balkans and the rest of Europe, but she, like Frattini, appears to have little or no input to GOI Russia policy. The PM's staff does not fare much better. The Office of the Diplomatic Advisor is thinly staffed - with only one officer assigned to each geographic region. The position covering Russia is staffed by a midlevel diplomat who is in the process of being transferred. No replacement is likely to be named. As a result, the officer covering the Middle East (also the deputy for the office) will be forced to take on those duties in addition to his already overwhelming portfolio and management duties.

10. (C/NF) In 2008 the MFA undertook an effort to produce a long-term foreign policy strategy for the GOI. In a paper entitled "Rapporto 2020" the MFA outlined its strategic vision for the next decade and a half. The document notes that geostrategic realities have created the need for Italy to adapt its foreign policy with regard to Russia and calls for Italy to seek 'a privileged relationship' with Moscow in order to press its overwhelmingly preeminent bilateral concern: energy.

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Energy Becomes Key Bilateral Issue - - - - - - - - - - - - - - - - - -

11. (C/NF) With virtually no domestic energy reserves, no domestic nuclear power, and an ambitious parastatal energy company, Italy's key bilateral concern with Russia has become the quest for long-term guarantees of energy supplies. The GOI has supported ENI and other energy giants' efforts to create a unique partnership with Russia and Gazprom for long-term cooperation. ENI, Italy's most prominent energy parastatal, wields immense political power; its business strategy has focused on complicated geopolitical environments generally perceived as overly risky by many of its international competitors. ENI's lobbying efforts vis-(-vis the GOI are better funded than most government offices. It hosts one diplomatic advisor assigned from the MFA. Going by press reports alone, we would judge that PM Berlusconi grants its director, Paolo Scaroni, as much access as he does his own FM.xxxxxxxxxxxx. Members of political parties on both sides of the aisle have told us that ENI is one of the leading financial contributors to Italy's many think-tanks - many of which produce public diplomacy discussions and events on the importance of Italy-Russia relations. At one such event in 2007, a conference on Central Asia, representatives from ENI and Edison were given 30 minutes each to speak, while the four Foreign Ministers and Deputy Foreign Minister of five Central Asian former Soviet states were all crammed into a single hour. There is even suspicion that ENI maintains journalists on its payroll.

12. (C/NF) Members of political parties from both sides of the aisle have told us that ENI does not limit its dialogue with the government to energy issues. One member of the opposition center-left PD party told poloffs that ENI's presence in Russia exceeds that of Italy's understaffed embassy. While it is unclear how much policy coordination occurs between ENI and the Russian political structure, the same PD party members noted that ENI had as much contact with Russian political and economic leaders as the embassy, if not more, and political messages were frequently passed through such commercial/economic channels. Back in Rome, ENI maintains strong contacts with members of the Italian parliament - something the MFA does not do (apart from requested briefings to members of the foreign affairs committees).

An Energy Policy without the Policy - - - - - - - - - - - - - - - - - -

13. (C/NF) ENI and other energy giants have managed to press their case quite effectively within the highest ranks of the GOI. Italian leaders on both sides of the aisle seem strangely unconcerned about dependence on Russian energy. They point out that Italy depended on Russian coal during the darkest days of the Cold War with n dire consequence. Italians are also lulled into complacency by the fact that geographic proximity to North African resources means that they are far less dependent on Russia than are the Germans or the former Eastern bloc countries.

14. (C/NF) During a March 2008 visit to ENI Headquarters embassy staff were given a briefing on ENI's Russian energy operations (available on Embassy Rome's Classified web site). ENI's view of the European energy situation was disturbingly similar to that of GAZPROM and the Kremlin, and at times laced with rhetorical flourishes reminiscent of Soviet-era double-speak: according to ENI, the real threat to Western Europe's energy security is not Russia -- it is Ukraine. The real solution to Europe's energy insecurity, according to ENI, lies in more direct pipeline connections to Russian gas fields and a need for pipelines that do not go through Ukraine - the rationale for the South Stream and Nord Stream pipelines (ref b). ENI's engineering arm hopes to construct both pipelines using experience gained in the construction of the Blue Stream pipeline that connects Russia and Turkey under the Eastern portion of the Black Sea. Additionally, ENI seeks full partnership with Russia on the South Stream project. GOI and ENI contacts have reported that the company was having trouble getting a firm Russian commitment to this South Stream partnership. The plummeting price of hydrocarbons may have reduced the economic incentives for this project, but many analysts believe that Russian geo-strategic concerns will trump business considerations on this project. The most recent Russia- Ukraine gas dispute seems to have revived interest in the Nord Stream and South Stream projects, especially among those who see Ukraine as the problem.

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15. (C/NF) Italy is not totally blind to the dangers of its dependence on Russia, however, and it is taking some steps that may prevent an increase in the percentage of their energy that they get from Russia. Upon returning to power, Berlusconi announced that he would return the country to nuclear power. While the GOI seems serious, this project will require eye-popping expenditures, long- term commitment, and the resolution of thorny environmental problems. Some fear that the nuclear project was launched in response to an oil price of $140 per barrel, and wonder if the Italian commitment to nuclear power will recede if oil prices stay low. Italy is also increasing its use of Liquid Natural Gas and is finishing work on a new terminal in the Northern Adriatic. While less-than-enthusiastic about the EU's complex Nabucco pipeline, the GOI seems to be supporting the smaller-scale Turkey-Greece-Italy pipeline project designed to bring Caspian gas to Western Europe. Edison, a French company with Italian roots, is trying to determine if it should commit to this project. While Azeri gas supplies and Turkey's willingness to allow the gas to flow West are unresolved issues, Edison believes its project has a chance of succeeding because unlike Nabucco, it is small enough -- it believes -- not to provoke opposition from Russia. The GOI -- especially powerful Minister for Economic Development Scajola -- supports the TGI project (in fact GOI officials complain if the U.S. sometimes seems to imply that Nabucco should have priority). There is fear that a successful launch of South Stream would -- by promising to meet demand -- doom both South Stream and Nabucco.

A Foreign Policy Designed to Deny Russia Nothing - - - - - - - - - - - - - - - - - - - - - - - -

16. (C/NF) The combination of historical ideological sympathy, energy dependence, lack of institutional influence, and a close personal relationship between Berlusconi and Putin serve to provide Russia with an apparently trusted ally, overtly willing to work overtime within the EU on Moscow's behalf. Russia can count on Italy to support its efforts to remove irritants in its relations with the West, including:

- pressure on/within OSCE to overlook Russia's lack of compliance with its legally binding Istanbul commitments on frozen conflicts, - weak support or even opposition to NATO efforts to build closer ties to Georgia and Ukraine, - weak initial support for international efforts to recognize Kosovo's independence, - unhelpful comments on U.S. bilateral Missile Defense plans with Poland and Czech Republic, - support for Russian President Medvedev's plans to redefine European security architecture to undermine OSCE and NATO. - support for Russian efforts to undermine EU and US energy security initiatives for Europe.

17. (C/NF) In the past, Berlusconi's highly-prized personal relationship with U.S. President Bush was an important counterweight to Russian influence, but many pro-U.S. Italian party officials on both sides of the aisle have worried to us that Bush's departure could tempt Berlusconi to move closer to Russia. For his part, Berlusconi has publicly stated that he would like to become a bridge between the U.S. and Russia and to "educate a young and inexperienced new American president" on how to deal with the Russians. If the past is any guide, this will likely mean an intensified effort to press the Russian agenda with the U.S.

Mitigating the Problem: Pushing Back on a Corrosive Influence - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -

18. (C/NF) To tackle the problem head-on, Post has deployed a robust diplomatic and public affairs strategy targeting key figures inside and outside government. Our aim is two-fold: educate our interlocutors more profoundly on Russian activities and thus the context for U.S. policy, as well as build a counter- weight of dissenting opinion on Russia policy, especially within Berlusconi's political party. . Since the beginning of the summer, wit Berlusconi's return to power and the Georgia crisis, we have been engaging with GOI leaders aggressively at all levels. Pol, PA and Econoffs have engaged party members, GOI contacts, think tanks and even press to provide an alternative narrative to the Berlusconi insistence that Russia is a democratic and stable country that has been provoked by the West. The effort seems to be paying off. The opposition has begun taking jabs at Berlusconi by portraying him as choosing the wrong side of the debate. Some in the PdL have begun to approach us privately to say that they would like greater dialogue with us on the Russia issue, and have indicated their

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interest in challenging Berlusconi's giddiness about Putin. While we have a long way to go in changing the narrative, unfortunately, we have help - in the form of a PM who appears increasingly to be the mouthpiece of Putin.

Comment - - - -

19. (C/NF) The bilateral relationship between the U.S. and Italy is excellent and encompasses tremendous cooperation on many levels and on many fronts. Unfortunately, Berlusconi efforts to "repair" the relationship between the West and Russia (which as he told the Ambassador in their farewell meeting on February 23, "sticks in my gut as a large undigested mass") are threatening his credibility and becoming a real irritant in our relationship. We can help get him back on the right track by sending him a clear signal that the U.S. does not need an interlocutor for its important bilateral relationship with Russia and that his insistence on undermining existin structures and channels based on common interests and shared values within the alliance in exchange for short term stability is not a strategy Washington wishes to pursue.

Spogli

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Classified By: Ambassador David H. Thorne for reasons 1.4 (b) and (d).

1. (C/NF) SUMMARY. Though PM Berlusconi's parliamentary majority is strong, and nobody is yet willing to predict his political demise, a growing list of scandals, adverse court decisions and health issues have weakened him and led some erstwhile Berlusconi allies to begin hedging their bets on his political longevity. In a souring political environment, talk of conspiracy theories often trumps real political debate and distracts the Berlusconi government from pursuing, or even developing, a coherent political agenda. END SUMMARY.

Private matters weighing on berlusconi

2. (SBU) After a long hot spring and summer of personal and professional scandals, PM Berlusconi, returning from the August recess appeared briefly rejuvenated by a successful G8 summit and continued popularity with his base. However, the first of several blows fell on October 7 when a civil court ruled that the Berlusconi family's flagship business, Finnivest, must pay a rival company Euro 750 million for damages occurred as a result of a Finnivest lawyer bribing a judge in a decision involving both companies. Two days later, the Italian Constitutional Court concluded that one of the Berlusconi government's first pieces of legislation, a 2008 law postponing criminal investigations against Berlusconi and other senior officials, was unconstitutional (REFTEL). As a result, Italian magistrates have, once again, taken up several long-standing criminal cases against Berlusconi, with one case due to resume as early as November.

3. (C/NF) Two officials xxxxxxxxxxxx close to Berlusconi, in separate conversations with the Embassy, recently described the Prime Minister in strikingly similar terms. Council of Ministers U/S Gianni Letta told the Ambassador October 23 that Berlusconi is "physically and politically weak," describing the normally hyperactive Berlusconi as "not energetic." Longtime Berlusconi friend xxxxxxxxxxxx told an Embassy political officer October 22 that, "we are all worried about his health," noting that Berlusconi has fainted three times in public in recent years and that his medical tests have come back "a complete mess." xxxxxxxxxxxx said Berlusconi's frequent late nights and penchant for partying hard mean he does not get sufficient rest. The Italian press reported October 27 that Berlusconi has a mild case of scarlet fever, which he reportedly contracted from his grandchild. (Note: Berlusconi dozed off briefly during the Ambassador's initial courtesy call in September, and looked distracted and tired at an October 19 event attended by the Ambassador. End note.)

4. (C/NF) xxxxxxxxxxxx termed Berlusconi overwhelmed with private concerns. He noted that Berlusconi has felt alienated from his family since his wife, Veronica Lario, set off a public uproar by publishing an open letter last spring asking for a divorce and accusing the 74-year old PM of consorting with minors. Lario is reportedly asking for fifty percent of Berlusconi's personal assets plus Euro 100 million in yearly support. At the same time, according to xxxxxxxxxxxxx Berlusconi is afraid he will need to liquidate important business assets to make the Euro 750 million payment ordered by a civil court. xxxxxxxxxxxx added that a Palermo-based mafia investigation involving another longtime Berlusconi ally and confidant already convicted of ties to organized crime could turn into a damaging public spectacle.

Leading to conspiracy theories

5. (C/NF) A number of Embassy contacts have described a political environment dominated by conspiracy theories. In the wake of the two court rulings, Berlusconi accused President of the Republic Napolitano of working against him and lashed out emotionally against the judicial system, in general. Letta told the Ambassador that Berlusconi's outburst had led to "frosty" relations with Napolitano and said the episode has made him appear weak. Several PdL officials have hinted darkly to us that "institutional forces" are trying to unseat Berlusconi. (Note: In Italian political parlance, "institutional forces" can serve to mean one of many groups operating and wielding influence behind the scenes: business groups, intelligence services, freemasons, the Vatican, the magistracy, the United States, etc. While Italians are notably conspiracy-minded, their paranoia -- at least as far as Italian domestic politics go -- has historically been well-founded. End note.)

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6. (C/NF) xxxxxxxxxxxx confided that Berlusconi believes the Italian intelligence services might have deliberately entrapped him in his alleged affair involving a minor. During xxxxxxxxxxxx conversation with the Embassy political officer, xxxxxxxxxxxx to confide that an arrest was imminent of four Italian Carabinieri believed to be blackmailing the Lazio regional governor with a sex-tape. (Note: The story of the Lazio governor and a transsexual prostitute exploded in the press a few days later. End note.) xxxxxxxxxxxx told the Embassy officer that this case has convinced Berlusconi that he cannot trust his own intelligence services. Separately, on October 21, Northern League leader Umberto Bossi, commenting on Berlusconi's troubles, told the Ambassador that organized crime figures had probably set the trap for Berlusconi on some of the sex scandals, but that nobody denies that Berlusconi willingly went for the bait.

7. (C/NF) In a replay of the foreign press-induced scandals of last spring and summer, a London Times article accusing Italian troops in Afghanistan of paying off Taliban insurgents sparked speculation in and out of the GoI that the USG might have leaked the information to discredit the Berlusconi government. Moreover, it is not uncommon these days for PdL politicians to speculate-- via the press or even directly to Embassy officers-- that the new U.S. administration would like to see the Berlusconi government fall; some even believe the USG is actively undermining Berlusconi. The Ambassador recently probed Letta and Foreign Minister Franco Frattini to determine whether they shared this belief; both averred that they thought Berlusconi's relationship with the US administration was strong.

And palace intrigue

8. (C/NF) One of Berlusconi's would-be heirs, Chamber of Deputies President Gianfranco Fini, picked one of his periodic fights with Berlusconi in September, ostensibly over euthanasia and living wills, but the real issues were Berlusconi's non-democratic leadership style inside the party and the growing weight of the Northern League (LN). More recently, the powerful Minister of Economy, Giulio Tremonti, has openly challenged Berlusconi on fiscal policy, leading to talk simultaneously of his possible resignation as well as the possibility he was seeking to eventually succeed Berlusconi. In response to a direct question from the Ambassador, Gianni Letta said there was a small, but unlikely, possibility the government could fall. xxxxxxxxxxxx told us Tremonti, Fini and former Minister of Interior Giuseppe Pisanu are laying the groundwork for a post-Berlusconi succession struggle but felt the government remained stable for the time being.

As well as erratic decisions

9. (C/NF) Media mogul Berlusconi might be gaffe-prone when speaking off the cuff, but he has historically shown himself astute at strategic messaging. Those skills were noticeably absent in a recent incident which provoked both criticism and head-scratching from Berlusconi friend and foe alike. Ahead of a three-day trip to Russia to celebrate Vladimir Putin's birthday in mid-October, Berlusconi put out a press line that the visit was a "strictly private affair." This announcement was met with disbelief and some mockery. Adding to the mystery, however, the day before his departure, Berlusconi canceled his participation in the state visit of Jordan's King Abdullah of Jordan, staying in Milan with the explanation that he was feeling under the weather. Berlusconi, who prides himself on his personal relationships with key Middle East interlocutors thus, unavoidably, left the impression that, in choosing private fun over statecraft, he was husbanding his flagging energies for a blow-out party at Putin's private dacha. With the further news that Berlusconi was accompanied on the trip solely by Valentino Valentini, an unofficial intermediary/bagman who serves as Berlusconi's interpreter, Italy's political class openly questioned whether Berlusconi was going to Russia principally because the scrutiny of his private time by Italian and foreign photographers had made parties in Italy too risky for the time being.

Comment

10. (C/NF) Sex scandals, criminal investigations, family problems and financial concerns appear to be weighing heavily on Berlusconi's personal and political health, as well as on

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his decision-making ability. It is too early to begin speculating about Berlusconi's political demise, and Berlusconi has a well-known knack for rebounding. However, though most are trying hard not to be too obvious about it, some of Berlusconi's own lieutenants have apparently decided it is not too early to begin laying the groundwork for "il dopo," as Italians call the potential post-Berlusconi era. In this souring political environment, conspiracy theories have all but supplanted serious political debate. Septel will address the implications of Berlusconi's fortunes on how we do business with the government. END COMMENT thorne

Important note on the dispatches...

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Classified By: Ambassador David H. Thorne. Reasons 1.4 (b) and (d).

1. C) Summary: The Ambassador visited recuperating Prime Minister Silvio Berlusconi at his Lombardy estate for a private luncheon December 30. The Ambassador had suggested he visit Berlusconi after the Prime Minister was assaulted at a Milan rally in mid-December. Accompanied by Gianni Letta, the Undersecretary in the Prime Minister's office and effectively Berlusconi's second in command, Ambassador flew up for the meeting on the Prime Minister's plane. Bandaged and bruised from the December attack, Berlusconi was nonetheless upbeat and eager to show off his new project for training Italy's elite and share his thoughts on European leaders and domestic politics. Berlusconi was effusive about U.S.-Italian relations and Letta promised action on roping in ENI operations in Iran and pushing ahead on Megaports. End Summary

The Recuperating Prime Minister -------------------------------

2. C) Following the Ambassador's call to Gianni Letta suggesting the Ambassador visit the Prime Minister during his recuperation, Letta, the Undersecretary in the Prime Minister's Office, invited Ambassador Thorne to accompanied him to Milan on December 30 for a private afternoon with the Prime Minister. The three hour session, held in Italian, involved only the Prime Minister, Letta and the Ambassador, and included a visit to Berlusconi's latest endeavor, a private training school for Italy's elite, and a wide-ranging lunch with the two top decision makers in the Italian government.

3. C) Berlusconi was still bandaged and scarred from the assault in early December where a mentally unstable man hurled a die cast model of Milan's cathedral at his head. Berlusconi noted that the missile had struck a glancing blow to his cheek, cutting him, breaking his nose and some of his teeth, but if it had hit him straight on "it would have killed" him. Letta recounted separately that Berlusconi had slumped into a depression following the attack - "he's an impresario, he wants everyone to love him " - but that had snapped out of it and was on the mend. Letta also noted that their tour of Berlusconi's new project site was the Prime Minister's first excursion outdoors since his release from the hospital.

U.S.-Italy: A Prized Relationship ---------------------------------

4. C) In luncheon discussions, Berlusconi unabashedly stated that he prized Italy's relationship with the U.S. and that his government stood ready to help us, whatever the issue. He noted that Italy owed the United States a debt of gratitude for salvation during World War II, and for protection throughout the Cold War. On Afghanistan, basing issues, and other tough problems, Italy was committed to helping the U.S. get to the right solution. He noted that he hoped that the Italian increase in Afghanistan would help President Obama and address the situation on the ground.

Berlusconi on European Leaders ------------------------------

5. C) The Prime Minister and Letta also gave their run down of current European political leadership. Berlusconi assessed that Sarkozy's star was clearly waning in European circles and that the French President did not command the same influence he did a year ago. Letta was less convinced, noting to the Ambassador that both Berlusconi and Sarkozy were "big dogs angling for the same spotlight." Berlusconi recounted how he had played an instrumental role in the Spring in persuading a reluctant Erdogan to accept Danish PM Rasmussen as the new NATO Secretary General, overcoming the Turkish President's profound irritation at Rasmussen for not silencing Kurdish language radio stations despite numerous requests. On Russia, Berlusconi felt that Putin and Medvedev got along well, respected each other, and had an effective relationship. In fact, farewells after lunch were unexpectedly cut short by an incoming call from Putin.

Iran: Appalled by violence, Will try to rope in ENI --------------------------------------------- ------

6. C) On Iran, Berlusconi noted that he was appalled by the Iranian crackdown. He offered the capabilities of the Italian intelligence services and assured full sharing of information gathered on the internal dynamics in Tehran. Letta, as the supervising authority over Italy's intelligence services, assured the Ambassador of a continuation of our

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already excellent bilateral cooperation on the issue. Letta also promised that he would talk to ENI CEO Scaroni about the energy giant's ongoing operations in Iran and, if he could, persuade them to halt activities.

Megaports - GOI to determine POC --------------------------------

7. C) In response to the U.S. request to move forward on Megaports, Letta told the Ambassador that the issue would be discussed at the Council of Ministers meeting on January 8 and that they would be in contact soon thereafter to convey which ministry would have lead in the GOI for implementing the project and as such be the primary interlocutor for our Embassy.

Italy's Courts - Problem Number One -----------------------------------

8. C) Berlusconi forthrightly identified the magistratura - Italy's judiciary and courts -- as Italy's "biggest problem" and told the Ambassador that he was ready to forge an alliance with the center left opposition to implement judicial reform. He noted that a legal system where issues were never definitively resolved -- where you can be absolved of a crime and yet have the case resurrected later - sapped Italy's political and economic system. He argued that this is what has happened in his own case, where he has been cleared in the past but the same charges keep on returning repeatedly. He said that he had allies in the opposition on the need for reform, including PD Leader Bersani. Letta cautioned the government won't know if it has the clout to deliver on such an idea unless it secures a decent showing in regional elections in March 2010.

Smart Guys in the Opposition ----------------------------

9. C) Berlusconi and Letta displayed a great deal of respect for opposition leaders. Berlusconi praised the Democratic Party Leader, Pier Luigi Bersani as a "straight shooter" who was fair with a top rate intellect. Separately Letta was also complimentary about former Prime Minister (and archrival) Massimo D'Alema who he credited with showing courage and integrity during the Balkans crisis and taking some very tough decisions. Letta noted that D'Alema's prickliness and "smartest guy in the room" demeanor made dealing with him a chore, but acknowledged his judgment and political effectiveness, which was why Berlusconi backed him for the EU Foreign Minister position despite their differences. Letta told the Ambassador that he did not have a clear judgment on how DiPietro will play in domestic politics and looked forward to future conversations. On other domestic political issues, Letta thought that the current estrangement between the governing PDL party and Sicilian President Lombardo was a minor issue and they would patch it up quickly.

Worried about a flat 2010 -------------------------

10. C) Both Berlusconi and Letta expressed concern about the limited prospects for economic growth in 2010. Berlusconi thought that Italy had weathered the past year of the financial crisis fairly well but thought it would be a challenge to produce enough growth in 2010 to start replacing jobs lost. The Prime Minister was less concerned that a financial meltdown in Greece would have EU-wide impact. He said that he had a good relationship with Greek PM Papendreou and was confident that he could right the situation.

New Media - Important for Liberty ---------------------------------

11. C) In response to the Ambassador's questions to the Prime Minister about the role of the internet, Berlusconi shot back "it's important for liberty." New media - particularly Facebook which has been instrumental in the past month in organizing a national "No Berlusconi Day" and more controversially in continuing to host "Kill Berlusconi" pages - has vexed the GOI, - but the Prime Minister stated that he felt the evolving media was both critical to the future and also to the preservation of liberty. But he felt there needed to be better tuned controls to prevent the most extreme use of the new outlets.

The Berlusconi Leadership Academy ---------------------------------

12. C) The Prime Minister commenced the visit by personally

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conducting a guided tour of his most recent project, a private academy to train Italy's brightest young minds. Berlusconi led Letta and the Ambassador on a personal tour of a newly rehabbed Lombardy estate that will serve as the home of the enterprise. The completely renovated 17th century country mansion, Villa Gernetto, will house a special school set to open in March for one hundred of Italy's most talented young leaders, completely funded from Berlusconi's personal fortune. The Prime Minister intends to choose the students himself and he envisions an environment where Italy's best and brightest live and study, taught by world leaders "like Blair and Clinton."

Comment -------

13. C) The Ambassador's intimate afternoon with Italy's two top decision makers was both a testament to the priority Berlusconi gives the U.S.-Italy relationship but also perhaps a sign that the GOI has achieved its long-sought level comfort and ease with the Obama administration. It is also a dividend of the Ambassador's cultivation of the relationship with Letta, which has opened up a personal channel to the Prime Minister. The Italian press coverage of the following day clearly took this message from what they viewed as an extraordinary private session. The Prime Minister was clear that he expects to be called upon to deliver for the U.S., which he will do out of principle, not self-interest. Despite being given numerous openings, neither the Prime Minister nor Letta asked for anything from the U.S. during the lengthy luncheon. A striking aspect of the session was Letta's clear position as co-regent, with Berlusconi deferring regularly to his colleague and with Letta airing opposing points of view to his boss during the luncheon. Thorne