Matteo Renzi, Sanctions and EU after Brexit

The closeness between the leaders of Italy and Russia and the hopefully growing political role of the Italian prime minister in Europe are valid premises to raise Matteo Renzi's voice in Brussels, urging a decisive end of the "commercial war" against Russia.

During the recent visit to Russia, Italian Prime Minister Matteo Renzi has met Russian President Vladimir Putin at the XX-th St. Petersburg International Economic Forum. This visit was crucial for the future development of close and friendly relations between Russia and Italy, especially after the so-called Brexit, which caused the political and economic turmoil in the European Union. The Brexit will have implications "for the UK and Europe as a whole, and for us it will ultimately have an impact," Vladimir Putin said.

The European Union continues to persevere sanctions against Russia, which two years ago 'answered' with measures banning the import of agro products (51 categories) such as fresh food, fruits and vegetables, dairy products, meat, fish and seafood, etc. These measures were confirmed on June 29 (officially beginning from next August 6, 2016), and will remain in force until December 31, 2017. The counter-sanctions are supported by other protectionist measures, making the Russian public authority to acquire leathers, products of light industry or medical devices from domestic producers.

According to CONFINDUSTRIA (General Confederation of Italian Industry) data, during the first year of the embargo the export of Italian agri-foods fell by 36 percent in comparison with the previous year. Other countries have suffered the same consequences. In fact, France, Germany, the UK and Spain respectively lost 38, 29, 24 and 46 percent, but Denmark, Finland and Ireland suffered most. Overall Italian exports fell by 25.2 percent in 2015, falling from 9.5 billion in 2014 to 7.1 billion euros in 2015. According to SACE estimates, further reduction to 6.5 billion euros is expected in 2016. According to Coldiretti, Europe's largest agricultural professional organization, the "trade war" against Russia generated a backlash to the Italian exports, amounted in 600 million euros during the last two years. However, in five years prior to the sanctions, the Italian agri-food sector more than doubled its exports to Russia (+ 112%). At the same time cars, clothes and many other products that represent the best of Made in Italy, have suffered heavy setbacks.

In the light of the above-mentioned data and, first of all, of the possible economic consequences from the so-called Brexit, Matteo Renzi said in St. Petersburg that he did not allow the automatic extension of economic sanctions against Russia. However, nothing has changed. Brussels decided to extend these sanctions against Russia until January 2017. The German chancellor Angela Merkel reiterated the need to extend these measures until Moscow respect the Minsk Protocol. In any case inside the European Union, in addition to Italy, other member states also indicated their support for the removal of sanctions. Considering the current political difficulties experienced by the European Union, Italy can play a very effective role in supporting a radical review of the European policy towards Russia. The data show that the sanctions, introduced in 2014, did not have any success, except causing serious economic consequences for both sides. So when Rome will really intervene in favor of Russia? Italy has already established strong relationship with Russian economic and business circles and, according to statement by Matteo Renzi, "[...] we are here to build bridges [...]"). The growing interest of Italy to corroborate relations with Moscow is evident. Renzi has also stated that "we are very fond of our Made in Italy", and indeed he could not say other words given the very high quality that distinguishes the Italian production. However, the most interesting was the other statement by Matteo Renzi, that "we like the idea of Made with Italy". Although this is not an innovative statement, it captures the sense of the need to strengthen cooperation with Russia, especially with the purpose of co-production with Russian entrepreneurs, who over the years have demonstrated the capacity to "import" synergistically Italian techniques and specializations.

Because of recent political difficulties the European Union cannot do without a dialogue and stronger economic cooperation with the Kremlin. Russia in the meantime is strengthening its role in the Eurasian Economic Union and the SCO, which a few days ago gave the green light to the membership of India and Pakistan. Therefore, the closeness between the leaders of Italy and Russia and, above all, the hopefully growing political role of the Italian prime minister in Europe, are valid premises to raise Matteo Renzi's voice in Brussels, urging a decisive end of the "commercial war" against Russia. It should not be ruled out that soon the EU will "change course", and from the beginning of 2017 it will review its position regarding Russia, given that the trade sanctions so far did not resolve the problem of war in the Eastern Ukraine and the uncertainty that surrounds it, with no chances, in my opinion, in the near future. Economic sanctions, desired by the West in 2014, have caused considerable backlash among Western producers, who have lost market shares in Russia and either did not serve to help the Russian system to make it more efficient and productive. I believe that the trade sanctions cannot change for the better the overall situation both in Ukraine and in the bilateral relations between Russia and the West. Therefore, I repeat, they are harmful for all actors in the field, especially for consumers, and those who do business. It would be better to separate the commercial aspects and investment issues from the clear need to reopen a strong and ambitious political dialogue between Moscow and Brussels.

In Russia, the victory of the "Leave" in the UK has been regarded as a defeat for the European Union, which could open up favorable scenarios for Moscow. Alexei Pushkov, head of the State Duma Committee for International Affairs, said that "Cameron drank from a mug with the inscription “In” threatened Putin and irreversible choice. But anti-Putin card is not played. The British are not afraid." In addition, current Mayor of Moscow Sergei Sobyanin tweeted, that "without Britain in the European Union will have no one so zealously uphold the sanctions against us." This is precisely one of big reasons why the Russians welcomed the Brexit, interpreted as a symptom of the weakness of the European Union. The UK outside the EU will allow Russia to play this card furthermore.

In sum, Russia could take advantage of the "difficulties" in the EU, thus being able to develop some pressure on Brussels to suspend or at least revise the trade sanctions policy adopted in 2014. The role of the Italian Prime Minister Renzi in this unexpected new European context will help the EU to take the most appropriate decisions in the name of mutual interests, considering the trade scenario and international policy.
Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.