Migration policy, trans-Atlantic trade tensions, economic and political reform – it’s no secret that the European Union is divided on many issues. One of the bloc’s last bastions of consensus has been its sanctions on Russia, enacted in the wake of Russia’s military intervention in Ukraine and tightened since then. To be sure, the consensus has been threatened, but to date, no challenger had been strong enough to break the united front. Italy is that challenger.
Matteo Salvini, Italy’s deputy prime minister and interior minister, has made quite a name for himself since assuming his position at the start of June. Last weekend, Salvini was in Moscow, where he declared during a press conference that his government could veto a renewal of EU sanctions against Russia when they are up for review in January 2019. The sanctions, which were just extended on July 5, must be reapproved every six months, and all it takes is one dissenter to cancel them.
For Italy, this is part serious threat, part negotiating ploy. The sanctions have been costly for all of Europe but especially for Italy. Italian exports to Russia in both 2015 and 2016 (the most recent year for which official data is available) were almost half what they were in 2013, the last full year before the sanctions were enacted. By mid-2017, Italy had lost more than 10 billion euros’ ($11.7 billion) worth of exports to Russia. (Northern Italy was hit particularly hard. It’s also the base of support for Salvini’s League party, formerly the Northern League.) Italy had the second-lowest growth among G-7 countries last year, and lifting sanctions would be a welcome boost for Italian businesses.
But abolishing the sanctions isn’t Italy’s real goal. For one thing, if it wanted, Rome could have vetoed the sanctions barely two weeks ago. For another, Salvini described a veto as a “last resort,” an invitation for Italy’s partners to offer a compromise. And he did so with almost six months to spare before the issue must be decided again. What Italy really wants is, first, a loosening of the sanctions – ideally so that Italian pharmaceuticals, automobiles and investment in agricultural R&D can be cleared – and, second, greater burden sharing on migration. EU rules place the onus on processing and resettling asylum seekers on the member state in which they arrive, and Italy has been among the EU’s top two entry points for migrants for years. Brussels has proposed and tried to compel member states to set up a quota system to relieve Italy of this strain and more equitably distribute asylum applicants, but some Central and Eastern European countries in particular have resisted. Some of these same countries have the most to fear from a stronger Russia, which they worry could interpret unilateral de-escalation on Europe’s part as weakness. A threat to strike down Russia sanctions might be the warning they need to get on board.
Before Italy, the governments in Greece and Hungary spoke out against the sanctions. Brussels, led by Germany, whipped both back in line. By overall export value, no EU country has suffered more from Russia sanctions than Germany. Voices among the German business community and even from corners of the government have called for an easing of the sanctions. Yet Berlin knows how important it is to EU members close to Russia, like Poland, the Baltics and Romania, that the bloc presents a united front. (Some of these countries, especially Poland and the Czech Republic, are also important components in the German production chain that Berlin would rather not upset.) Germany lives on exports, and it needs its EU trade partners more than it needs trade with Russia. It is willing to pay the price of lost business opportunities with Russia if it means keeping the EU politically united – and thus economically united.
What makes Italy’s veto threat different from previous ones is that Italy has the clout to defend itself against the EU’s pressure tactics. Italy is the third-largest economy in the eurozone and fourth-largest in the EU. Unlike Greece and Hungary, which are among the top recipients of funding from Brussels, Italy is the fourth-largest contributor to the EU budget. Brussels has toyed with the idea of tying funding to things like rule of law to give it the ability to punish disobedient member states, but against a net contributor like Italy, that is an empty threat. The EU could find an excuse to start legal proceedings against Italy, like it has done against Poland, but as the Polish case shows, this is hardly an effective means of coercion. And there’s no way for an individual EU member such as Germany to unilaterally punish Italy with sanctions without blowing up the EU’s customs union – a self-destructive measure, to say the least.
Italy’s government would much prefer some easing of sanctions combined with a reform of Europe’s migration policy over a complete removal of sanctions and no migration deal. It tried last month during the EU summit to use obstructionism to win concessions on the migration issue, raising the heat on German Chancellor Angela Merkel, who needed to secure some concessions of her own at the summit to save her government. Putting the sanctions against Russia on the chopping block drags into the negotiation those EU states that have been most resistant to accepting asylum seekers. Even if the effort fails, it will have cost Italy little, seeing as assistance from other states on migration is already minimal.
Faced with a credible danger to the Russia sanctions, Germany will try to seize control of the situation to minimize political damage to the EU. It will push for a compromise that would reduce sanctions to preserve the EU’s united front – a decision that will be popular with German companies and some political parties. With Italy’s veto hanging over their heads, the Baltics, Poland and Romania will be forced to accept the compromise to maintain at least part of the sanctions. There’s been a fault line within the EU over its Russia policy for a while, but it took a challenge from a major member state for it to threaten an earthquake.