US embassy cable - 02ROME620

JSF/ITALY: POSITIVE OUTLOOK FOR MOU BUT ECONOMIC CASE NOT MADE

Identifier: 02ROME620
Wikileaks: View 02ROME620 at Wikileaks.org
Origin: Embassy Rome
Created: 2002-02-08 09:15:00
Classification: CONFIDENTIAL
Tags: MARR EAIR PGOV PREL EAIR PGOV PREL IT ITMARR
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

C O N F I D E N T I A L SECTION 01 OF 02 ROME 000620 
 
SIPDIS 
 
DEFENSE FOR DEPSECDEF AND USD AT&L 
 
E.O. 12958: DECL: 02/07/2012 
TAGS: MARR, EAIR, PGOV, PREL, EAIR, PGOV, PREL, IT, ITMARR 
SUBJECT: JSF/ITALY:  POSITIVE OUTLOOK FOR MOU BUT ECONOMIC 
CASE NOT MADE 
 
REF: A. (A) 01 ROME 6545 
     B. (B) ROME 474 
 
CLASSIFIED BY: ECONOMIC MINISTER MARGARET DEAN 
 FOR REASONS 1.5 (B) AND (D). 
 
                       CONFIDENTIAL 
 
PAGE 02        ROME  00620  01 OF 02  081322Z 
 1.  (C) SUMMARY: WHILE PRIME MINISTER BERLUSCONI IS LIKELY 
TO SIGN ITALY UP FOR THE JOINT STRIKE FIGHTER (JSF) PROGRAM, 
THE PERCEPTION IN NON-DEFENSE MINISTRIES IS OF AN UNEQUAL 
AGREEMENT, WITH INSUFFICIENT ECONOMIC/INDUSTRIAL BENEFITS FOR 
ITALY.  ACCORDING TO MINISTRY OF PRODUCTIVE ACTIVITIES 
AEROSPACE DIRECTOR (PROTECT) CUZZONI, NO ATTEMPT HAS BEEN 
MADE BY THE MINISTRY OF DEFENSE TO DEMONSTRATE THE ECONOMIC 
OR INDUSTRIAL BENEFITS OF JSF FOR ITALY, LEAVING A PERCEPTION 
THAT THE CASE CANNOT BE MADE.  ALENIA'S ZAPPA HAS REPORTEDLY 
GAINED SUPPORT FROM PRESIDENT CIAMPI AND NATIONAL ARMAMENTS 
DIRECTOR ADMIRAL DI PAOLA TO PRESS THE U.S. FOR A BETTER DEAL 
(DURING DI PAOLA'S VISIT TO WASHINGTON FEB. 12-13).  CUZZONI 
DOUBTS THAT THE PENDING BILATERAL MOU WILL BE DERAILED, BUT 
FEARED POLITICAL FALLOUT FOR BERLUSCONI IF THE CENTER-LEFT 
PAINTS HIM AS HAVING SIGNED AN UNEQUAL ACCORD AGAINST ITALY'S 
ECONOMIC INTERESTS.  END SUMMARY. 
 
2. (C) AT LUNCH FEBRUARY 6 WITH ECON COUNSELOR, ALFREDO 
CUZZONI (PROTECT), AEROSPACE DIRECTOR FOR THE MINISTRY OF 
PRODUCTIVE ACTIVITIES, SAID THAT PRESIDENT CIAMPI HAD AGREED 
TO TAKE ON THE PRIME MINISTER REGARDING JSF ON BEHALF OF 
ITALIAN INDUSTRY (AND ALENIA IN PARTICULAR).  THIS WOULD BE 
PART OF A COMBINED STRATEGY TO PRESS FOR A BETTER DEAL -- 
CIAMPI AT THE HIGHEST POLITICAL LEVEL, NATIONAL ARMAMENTS 
DIRECTOR ADMIRAL DI PAOLA RAISING THE ISSUE WITH EMBASSY AND 
IN WASHINGTON MEETINGS ON FEBRUARY 12-13, AND ALENIA CEO 
ZAPPA CONTINUING TO PRESS LOCKHEED MARTIN. ZAPPA HAS 
REPORTEDLY CONVINCED DI PAOLA AND CIAMPI THAT -- IF THE GOI 
REFUSES TO SIGN A BILATERAL JSF MOU UNTIL ALENIA IS SATISFIED 
WITH ITS DEAL -- THE USG WILL HAVE NO CHOICE BUT TO LEAN ON 
LOCKHEED TO BETTER ITS TERMS. 
                       CONFIDENTIAL 
 
PAGE 03        ROME  00620  01 OF 02  081322Z 
 
3.  (C)  ECON COUNSELOR POINTED OUT A NUMBER OF ADVANTAGES TO 
ITALY THOUGH JSF PARTICIPATION, INCLUDING EXPOSURE TO NEW 
MANUFACTURING, DESIGN AND MANAGEMENT TECHNOLGY, LONG TERM 
ITALIAN JOBS AND REVENUES BASED ON THE GLOBAL PRODUCTION RUN 
RATHER THAN JUST THE ITALIAN RUN, BENEFITS TO ITALIAN SMES AS 
WELL AS ALENIA AND FIATAVIO.  SHE ALSO DISCUSSED THE 
IMPORTANCE OF PUTTING ASIDE THE OFFSETS/WORKSHARE MENTALITY, 
AND LOOKING TOWARD THE BENEFITS OF MARKET/PERFORMANCE BASED 
CONTRACTS.  CUZZONI RESPONDED THAT ITALY COULD ONLY COUNT ON 
WRITTEN GUARANTEES, THAT STATEMENTS OF POSSIBLE FUTURE 
BENEFITS HAD NO VALUE WITHOUT GUARANTEES AND THAT, IN HIS 
MANY YEARS IN THIS AREA HE HAD SEEN U.S. PROMISES FADE ON 
MANY OTHER DEALS. 
 
4.  (C) WHEN ECON COUNSELOR EXPLAINED THAT THE BILATERAL MOU 
MUST BE SIGNED BEFORE THE INDUSTRY CONTRACTS ARE SIGNED, 
CUZZONI WAS SURPRISED.  HE NOTED THAT NEITHER DI PAOLO NOR 
DEFENSE NOR ZAPPA HAD TOLD HIM THIS.  "IN THAT CASE, WE HAVE 
NO LEVERAGE. WE HAVE TO ACCEPT WHAT IS ON THE TABLE," HE 
STATED. 
 
5. (C) CUZZONI NOTED THAT HE, HIS MINISTER (MARZANO) AND 
MINISTER TREMONTI OF FINANCE ARE STILL SEEKING SOLID 
SUPPORTING DATA ON ECONOMIC BENEFITS FROM JSF FOR ITALY 
(REFTEL A).  THE ITALIAN DEFENSE MINISTRY IS SOLD ON THE 
MILITARY BENEFITS, BUT NO ONE HAS CRITICALLY EXAMINED THE 
INDUSTRIAL/ECONOMIC BENEFITS FROM THIS ONE BILLION DOLLAR GOI 
INVESTMENT.  ABSENT ANY SUCH CASE BEING MADE, THE PRESUMPTION 
IN THE MINISTRY OF PRODUCTIVE ACTIVITIES IS THAT THE CASE 
CANNOT BE MADE.  AT THE SAME TIME, ALENIA AND FIAT AVIO 
                       CONFIDENTIAL 
 
PAGE 04        ROME  00620  01 OF 02  081322Z 
OFFICIALS ARE TELLING THE GOI THAT THE DEAL IS NOT 
SUFFICIENTLY ATTRACTIVE.  GOI OFFICIALS BELIEVE THAT THE UK 
SIDE LETTER OFFERED SUBSTANTIALLY BETTER TERMS FOR UK 
INDUSTRY. 
 
6. (C) NONETHELESS, CUZZONI NOW THINKS THAT A POLITICAL 
DECISION IN FAVOR OF JSF IS LIKELY.  HE BELIEVES THAT CIAMPI 
AND ZAPPA WILL TRY TO DERAIL IT, BUT THAT BERLUSCONI WILL 
DECIDE FOR JSF IN THE END.  HE IS CONCERNED, HOWEVER, THAT 
CIAMPI AND ZAPPA MIGHT CREATE A PARLIAMENTARY AND PUBLIC 
PERCEPTION THAT THE PRIME MINISTER HAS SIGNED AN UNEQUAL 
AGREEMENT WITH LITTLE ECONOMIC BENEFIT FOR ITALY IN TERMS OF 
TECHNOLOGY, JOBS OR MONEY. 
 
7. (C) COMMENT:  ABSENT ANY INTERAGENCY PROCESS IN THE 
INTERNAL ITALIAN DISCUSSIONS, THE MINISTRY OF DEFENSE HAS NOT 
EXPLAINED, AND APPARENTLY CANNOT EXPLAIN, THE COST/BENEFIT TO 
ITALY OF JSF PARTICIPATION. ZAPPA (AND POSSIBLY ALSO FIAT) 
HAS ARGUED TIRELESSLY THAT THE DEAL IS BAD FOR ITALY. 
DEFENSE MINISTRY OFFICIALS SIMPLY CONVEY THEIR ENTHUSIASM FOR 
THE JSF.  THE EMBASSY HAS TALKED TO OTHER MINISTRIES, 
STARTING AT THE AMBASSADORIAL LEVEL, TO EXPLAIN THE POTENTIAL 
BENEFITS, INCLUDING THOSE BEYONE ZAPPA'S ALENIA.  CUZZONI 
WAS, FOR EXAMPLE, COMPLETELY UNAWARE OF THE POTENTIAL FOR 
 
                       CONFIDENTIAL 
 
                           CONFIDENTIAL     PTQ0267 
 
PAGE 01        ROME  00620  02 OF 02  081244Z 
ACTION EUR-00 
 
INFO  LOG-00   AID-00   ACQ-00   CEA-01   CIAE-00  COME-00  CTME-00 
      DOTE-00  SRPP-00  DS-00    EB-00    EXIM-01  E-00     FAAE-00 
      VC-00    FRB-00   H-01     TEDE-00  INR-00   ITC-01   L-00 
      AC-01    NSAE-00  NSCE-00  OES-01   OMB-01   OPIC-01  PC-01 
      PM-00    ACE-00   SP-00    SSO-00   SS-00    STR-00   TRSE-00 
      USIE-00  EPAE-00  SNIS-00  NISC-00  PMB-00   DSCC-00  DRL-02 
      G-00     SAS-00     /011W 
                  ------------------640625  081244Z /45 
O 080915Z FEB 02 
FM AMEMBASSY ROME 
TO SECSTATE WASHDC IMMEDIATE 2027 
INFO SECDEF WASHDC IMMEDIATE 
 
C O N F I D E N T I A L SECTION 02 OF 02 ROME 000620 
 
SIPDIS 
 
DEFENSE FOR DEPSECDEF AND USD AT&L 
 
E.O. 12958: DECL: 02/07/2012 
TAGS: MARR, EAIR, PGOV, PREL, IT 
SUBJECT: JSF/ITALY:  POSITIVE OUTLOOK FOR MOU BUT ECONOMIC 
CASE NOT MADE 
 
FIAT AVIO TO PRODUCE ENGINE GEARBOXES FOR THE ENTIRE WORLD 
JSF PRODUCTION RUN.  HE EXPRESSED INITIAL DISBELIEF, THEN 
RESPONDED THAT  THIS WAS A GREAT BENEFIT AND WAS SURPRISED 
THAT HE HAD NOT BEEN TOLD OF IT BEFORE.  SIMILARLY, HE WAS 
IMPRESSED WITH THE LIST OF POTENTIAL ITALIAN SMES WITH WHICH 
                       CONFIDENTIAL 
 
PAGE 02        ROME  00620  02 OF 02  081244Z 
LOCKHEED MARTIN WAS CONSIDERING CONTRACTS. 
SEMBLER 
 
                       CONFIDENTIAL 
 
> 
 2002ROME00620 - Classification: CONFIDENTIAL 


Latest source of this page is cablebrowser-2, released 2011-10-04