Russian Financing Scheme in Italy Highlights Europe’s Vulnerabilities

2019-07-12T14:29:34-04:00
July 12, 2019
Research Assistant, Alliance for Securing Democracy
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On July 10th, Italian Deputy Prime Minister Matteo Salvini was implicated in a funding scandal involving Russian energy companies when audio of a meeting between his associates and Russian businessmen was leaked to the press. The meeting was first reported on in February 2019 by Stefano Vergine and Giovanni Tizian in the Italian newspaper L’Espresso; the recording recently leaked to Buzzfeed confirms that representatives of Russian interests sought to support Salvini’s right-wing populist La Lega party ahead of European elections earlier this year.

In the recording, Salvini’s close aid Gianluca Savoini and two other as yet unidentified Italians can be heard negotiating a scheme whereby a Russian oil company would sell fuel at a discount to the Italian ENI energy company through intermediaries. These middlemen would then transfer the discount – valued at around $65 million – to La Lega. It is uncertain whether the transaction took place, and Salvini denies that it did; if it did indeed take place, it would have been illegal under Italian law.

The scheme is yet another example of how Russia has found an eager partner in Europe’s populist right. La Lega’s financing would be a particularly brazen instance of direct Russian funding of an illiberal populist political party in the West. It is not without precedent however. In France, far-right 2016 presidential candidate Marine Le Pen benefitted from a €9.4 million Russian loan. In the United Kingdom, Brexit leader Arron Banks was reportedly offered mining investments by a Kremlin-connected oligarch. And in the Czech Republic, Russian gas firm Lukoil paid off a $1.4 million fine on behalf of presidential advisor Martin Nejedly.

Worryingly, gaps in financing laws sometimes allow the Russian government to make its contributions legally. In the aforementioned case of Marine Le Pen in 2016, France’s ban on foreign donations to political parties was circumvented by structuring the contribution as a loan. In the U.K., the Conservative Party has received hundreds of thousands of pounds in total from shell companies linked to Russian interests and state-affiliated actors, skirting Electoral Commission, which relies on parties to self-police that the ultimate source of their funds is within the U.K.

As the La Lega case demonstrates, the opacity of the energy sector makes it an ideal vehicle for concealing illicit foreign contributions. Russian dominance in the European energy industry offers it the chance to interfere in Western democracies at multiple stages in the delivery process: using local companies as delivery intermediaries in order to enrich favored local elites, laundering money through energy firms to conduct political financing, and using political and economic leverage to push European countries to pursue energy decisions that expand Russia’s influence, such as the Nord Stream 2 project.

Russia seeks to take advantage of legal loopholes, and in some cases breaks European and American laws, to pursue its foreign policy goals. That some European populists have shown few qualms in helping them do so represents a major long-term threat to European cohesion. European and North American policymakers should pinpoint loopholes in financing law to close, but should also be more assiduous in enforcing laws that are already on the books. Government inaction and bureaucratic inertia are cracks in the rule of law that Russia can and will continue to use to its advantage.

The views expressed in GMF publications and commentary are the views of the author alone.