Few European countries have closer ties to Moammar Gadhafi’s Libya than Italy
It’s little surprise then that the Italian stock market fell sharply this week, as a popular uprising against the 42-year regime of Gadhafi escalated, leading to violent turmoil and uncertainty about the path ahead for the oil-rich North African nation.
Libya, which was once an Italian colony, is a key supplier of oil and natural gas to Italy. Prime Minister Silvio Berlusconi’s government has spent years wooing Gadhafi, leading to considerable cross-border investment.
“Berlusconi has made enormous efforts to strengthen institutional ties between Italy and Libya, but also to strengthen personal ties between himself and Gadhafi,” said James Walston, a professor at the American University in Rome.
“If Gadhafi goes, that could cause trouble for Italian interests,” he said.
Italian companies have invested heavily in Libya, which is home to Africa’s biggest proven oil reserves. Energy giant Eni SpA /quotes/comstock/23g!eni (IT:ENI 17.08, -0.20, -1.16%) /quotes/comstock/13*!e/quotes/nls/e (E 46.88, +0.20, +0.42%) was Libya’s biggest international hydrocarbon operator in 2009, according to its website. Eni has operated in Libya since 1959.
In the construction and engineering sector, Impregilo SpA /quotes/comstock/23g!ipg (IT:IPG 2.26, -.00, -0.09%) has several key projects under development in Libya, including a conference hall in Tripoli and university campuses in three other cities.
In turn, Libya owns stakes in some of Italy’s highest-profile companies, including banking giant UniCredit SpA /quotes/comstock/23g!ucg (IT:UCG 1.85, +0.01, +0.76%) , aerospace and defense group Finmeccanica SpA /quotes/comstock/23g!fnc (IT:FNC 8.96, -0.15, -1.65%) , and soccer powerhouse Juventus Football Club SpA /quotes/comstock/23g!juve (IT:JUVE 0.87, +0.02, +1.95%).
As investors worried about what the Libyan unrest would mean for Italian companies, Milan’s benchmark FTSE MIB stock index slumped 3.6% Monday and a further 1.1% Tuesday. The index closed down 0.3% on Wednesday. Read more about European stock markets.
So far this week, Eni and UniCredit shares have both declined 7%. Impregilo’s shares are down more than 8%.
Berlusconi in a tough spot
International pressure on the Libyan leader has grown following his brutal crackdown on protesters. At least 300 people have died in the unrest, according to reports. Italy’s foreign minister on Wednesday was quoted as saying the death toll was likely over 1,000.
In a defiant televised address Tuesday, Gadhafi vowed to fight and to remain in Libya “until the end.”
Italy’s close ties to Libya have put Berlusconi in a difficult situation, as international condemnation of Gadhafi has grown.
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