C O N F I D E N T I A L SECTION 01 OF 04 ROME 002912

SIPDIS

E.O. 12958: DECL: 06/05/2012
TAGS: ELTN KCIP KCIP KCIP KCIP IT ITELTN ITELTN ITELTN
SUBJECT: ITALIAN RAILWAY LIBERALIZATION AND SECURITY

REF: A) ROME 01 4158 B) ROME 2533

CLASSIFIED BY: DEPUTY ECONOMIC COUNSELOR DOHERTY FOR REASONS 1.5 (B) AN
CONFIDENTIAL

PAGE 02 ROME 02912 01 OF 04 141435Z
D (D)


1. (C) SUMMARY: ITALY'S RAILWAY COMPANY, FERROVIE DELLO STATO
(FS), WHOSE HOLDINGS INCLUDE THE NATIONAL RAILWAY SERVICE AND
RAIL INFRASTRUCTURE PROVIDERS, IS ON AN ECONOMIC UPSWING DUE
TO A FAVORABLE MARKET AND SMART MANAGEMENT DECISIONS. TO
BOLSTER ITS BOTTOM LINE, FS IS FOCUSING ON INCREASING
CAPACITY, SPEED, AND RELIABILITY IN PASSENGER SERVICES,
MAINLY THROUGH THE CREATION OF A HIGH-SPEED RAIL NETWORK.
DESPITE THE MORE POSITIVE ECONOMIC PERFORMANCE OF FS, THE GOI
HAS NO PLANS TO PRIVATIZE THIS GOI ASSET. U.S. COMPANIES MAY
STILL FIND BUSINESS OPPORTUNITIES IN THE SECTOR, INCLUDING
THE PROVISION OF HIGH-TECH GOODS AND SERVICES, AND IN THE
LOCAL AND REGIONAL PASSENGER AND CARGO MARKET. FS OFFICIALS
REALIZE THAT THE RAILWAY NETWORK IS CRITICAL NATIONAL
INFRASTRUCTURE THAT COULD BE TARGETED BY TERRORISTS AND HAVE
HEIGHTENED SECURITY MEASURES SINCE SEPTEMBER 11. EMBOFFS
PLAN TO ATTEND, AS OBSERVERS, AN OCTOBER 2002 MEETING IN ROME
OF EUROPEAN RAILWAY SECURITY OFFICIALS TO ENGAGE THE GOI ON
THIS AND POSSIBLY OTHER CRITICAL INFRASTRUCTURE ISSUES. END
SUMMARY.

BACKGROUND
--------------

2. (SBU) ECONOFF HELD A SERIES OF MEETINGS WITH SENIOR
RAILWAY OFFICIALS TO GAUGE THE STATE OF THE SECTOR'S
LIBERALIZATION AND TO DISCUSS ITALIAN RAILWAY INFRASTRUCTURE
SECURITY IN THE POST-9/11 WORLD. OUR IMPRESSION IS THAT OF A
RAILWAY SECTOR ON THE ECONOMIC UPSWING, WITH BUSINESS
DIRECTORS MODERNIZING SYSTEMS TO IMPROVE PERFORMANCE, AND
WITH SECURITY DIRECTORS WHO HAVE IMPROVED SECURITY OVER THE
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PAGE 03 ROME 02912 01 OF 04 141435Z
PAST YEAR. INDIVIDUALS WITH WHOM WE SPOKE INCLUDE: MARIA
COSTA, DIRECTOR OF FOREIGN RELATIONS OF FS (THE ITALIAN
NATIONAL RAILWAY COMPANY); VINCENZO SOPRANO, DIRECTOR FOR
BUSINESS DEVELOPMENT OF FS; ENZO CELLI, DIRECTOR GENERAL FOR

RAILROADS OF THE MINISTRY OF TRANSPORTATION AND
INFRASTRUCTURES (MOT); GIOVANNI SATTA, DIRECTOR OF
FEDERTRASPORTO, A CONFEDERATION OF ITALIAN TRANSPORTATION
ASSOCIATIONS; DAMIANO TOSELLI, CORPORATE SECURITY DIRECTOR OF
FS; FRANCO FIUMARA, SECURITY DIRECTOR OF THE ITALIAN RAILWAY
NETWORK (RFI), AN FS HOLDING; AND RICCARDO MATTEI OF THE
RAILWAY CONSULTING FIRM STEER DAVIES GLEAVE.

SNAPSHOT OF THE RAILWAY SYSTEM
--------------

3. (U) A CORPORATE HOLDING COMPANY 100 PERCENT OWNED BY THE
ITALIAN FINANCE MINISTRY, FERROVIE DELLO STATO WAS PART OF
THE MINISTRY OF TRANSPORT UNTIL 1992 WHEN, AS MANDATED BY
EUROPEAN UNION (EU) DIRECTIVES (REF. A), IT BECAME A SEPARATE
STATE-OWNED HOLDING COMPANY. IN ACCORDANCE WITH SIMILAR EU
DIRECTIVES CALLING FOR THE SEPARATION OF THE BUDGETS OF
RAILROAD INFRASTRUCTURES AND RAILROAD SERVICES, FS IN 2000
CREATED TWO MAJOR HOLDINGS WITH SEPARATE MANAGEMENT AND
BUDGETS: TRENITALIA (THE PREDOMINANT ITALIAN RAILWAY SERVICE
COMPANY) AND RETE FERROVIARIA ITALIANA (RFI), THE NATIONAL
RAILWAY INFRASTRUCTURE PROVIDER. FURTHER FS HOLDINGS INCLUDE
GRANDI STAZIONI (THE HANDLING COMPANY OF 12 MAJOR TRAIN
STATIONS, MEDIE STAZIONI (THE HANDLING COMPANY OF 1,000
ITALIAN MINOR STATIONS), AND TAV (ITALY'S HIGH SPEED RAIL
COMPANY). FERROVIE DELLO STATO REMAINS A MAJORITY
STAKEHOLDER IN MOST OF THESE HOLDINGS, AND A SIZABLE MINORITY
STAKEHOLDER IN THE OTHERS.
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PAGE 04 ROME 02912 01 OF 04 141435Z


4. (U) SINCE THE FINANCE MINISTRY IS THE SOLE SHAREHOLDER OF
FS, THE ITALIAN INTERMINISTERIAL COMMITTEE FOR POLITICAL
ECONOMY (CIPE) EXERCISES CONTROL OVER ITS MAJOR ECONOMIC
TRANSACTIONS. THE TRANSPORT MINISTRY CREATES POLICIES
RELATED TO SAFETY, QUALITY OF SERVICE, INFRASTRUCTURE
DEVELOPMENT, AND COMMERCIAL COMPETITION.


5. (U) VINCENZO SOPRANO, DIRECTOR OF BUSINESS DEVELOPMENT FOR
FS, PROVIDED US WITH A SNAPSHOT OF FERROVIE DELLO STATO, AND
SOME STATISTICS ON ITS TWO MAJOR HOLDINGS. THROUGH
TRENITALIA AND RFI, FS OWNS AND OPERATES OVER 16,000
KILOMETERS OF NATIONAL RAILWAY LINES, 4,500 LOCOMOTIVES, MORE
THAN 10,000 PASSENGER CARS AND 50,000 FREIGHT CARS, 2,500
STATIONS, 570 CARGO AREAS, AND 367 ELECTRICAL STATIONS AND
SUBSTATIONS. IT HAS APPROXIMATELY 110,000 EMPLOYEES, DOWN
FROM 160,000 A FEW YEARS AGO (MOSTLY THROUGH ATTRITION). FS
EARNED APPROXIMATELY 6.9 BILLION EUROS IN REVENUES IN 2001,
AND HAD 4.7 BILLION EUROS IN CAPITAL EXPENDITURES. IT
TRANSPORTS APPROXIMATELY 90 MILLION TONS OF CARGO EACH YEAR
ON NEARLY 1,200 FREIGHT TRAINS PER DAY.

ECONOMIC PERFORMANCE: TURNING THE CORNER?
--------------

CONFIDENTIAL

CONFIDENTIAL PTQ2633

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ACTION EUR-00

INFO LOG-00 MFA-00 AF-00 AID-00 CEA-01 CIAE-00 CTME-00
DODE-00 DOTE-00 WHA-00 SRPP-00 DS-00 EAP-00 EB-00
EXIM-01 E-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
IO-00 ITC-01 L-00 AC-01 NEA-00 NSAE-00 NSCE-00
OMB-01 OPIC-01 ACE-00 SP-00 IRM-00 SSO-00 SS-00
STR-00 TRSE-00 USIE-00 SA-00 EPAE-00 DSCC-00 G-00
SAS-00 /007W
-------------- BD3F31 141437Z /38
R 141500Z JUN 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 4222
INFO EU MEMBER STATES COLLECTIVE
AMCONSUL FLORENCE
AMCONSUL MILAN
AMCONSUL NAPLES
DEPT OF COMMERCE WASHDC
DEPT OF TRANSPORTATION WASHDC

C O N F I D E N T I A L SECTION 02 OF 04 ROME 002912

SIPDIS

E.O. 12958: DECL: 06/05/2012
TAGS: ELTN KCIP KCIP KCIP KCIP IT ITELTN ITELTN ITELTN
SUBJECT: ITALIAN RAILWAY LIBERALIZATION AND SECURITY


6. (U) BOTH SOPRANO AND MARIA COSTA OF FS ARE OPTIMISTIC
ABOUT THE STATE-OWNED COMPANY'S FUTURE PERFORMANCE. FS
REGISTERED A MINUSCULE BUT SYMBOLIC PROFIT IN 2001 OF 20
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MILLION EUROS -- ITS FIRST PROFIT EVER, UP FROM A LOSS OF 683
MILLION EUROS IN 2000 AND 1.45 BILLION EUROS IN 1999.
SOPRANO AND COSTA ATTRIBUTE MUCH OF THIS SUCCESS TO THE
"PRIVATE-SECTOR CULTURE" IN TRENITALIA (WHICH MANAGES LONG
DISTANCE, REGIONAL, AND METROPOLITAN PASSENGER AND FREIGHT
SERVICES), NOTING THAT IT AND RFI MUST NOW OPERATE WITH THEIR
OWN BUDGET, RESOURCES, AND ABILITIES. ACCORDING TO INTERNAL
FS STATISTICS, CUSTOMER SATISFACTION AND CORPORATE IMAGE HAVE
IMPROVED AS WELL AS THE COMPANY'S SAFETY RECORD. SOPRANO
STATED THAT FS' .28 ACCIDENTS PER MILLION KILOMETERS TRAVELED
(THE LOWEST IN A DOWNWARD TREND DATING FROM 1996) IS WELL
BELOW THE EUROPEAN BENCHMARK OF .6 - .7 ACCIDENTS


7. (U) FS AIMS TO IMPROVE PERFORMANCE BY ENHANCING THE
CAPACITY, SPEED AND RELIABILITY OF ITS SERVICES, FOCUSING ON
PASSENGER (AS OPPOSED TO FREIGHT) TRAFFIC. A KEY PART OF
THIS STRATEGY IS THE DEVELOPMENT OF ITALY'S HIGH-SPEED RAIL
NETWORK THROUGH ONE OF ITS HOLDINGS, TAV (A PUBLIC-PRIVATE
PARTNERSHIP COMPANY FORTY PERCENT OWNED BY FS). THE
HIGH-PEED RAIL NETWORK WILL BE CONCENTRATED AROUND ITAL'S
FASTEST GROWING CITIES OF ROME, NAPLES, TURIN BOLOGNA,
FLORENCE, GENOA, AND VENICE. WHILE THS DUAL GAUGE TRACK
SYSTEM IS DESIGNED FOR PASSENGR SERVICE, FS HOPES THAT THIS
"VERTICAL BACKBONE (EVENTUALLY PLANNED TO INCLUDE 1,300
KILOMETERSOF TRACK) MAY ONE DAY TRANSPORT FREIGHT TRAFFIC AS
WELL. (NOTE: BY SOME ESTIMATES, ITALIAN INTERNAIONAL
RAILWAY FREIGHT IS EXPECTED TO GROW BY SEVETY-FIVE PERCENT
BY 2005. END NOTE).

8. (U) TA'S INCREASING PORTION OF FS' CAPITAL EXPENDITURES
(APPROXIMATELY 2 BILLION OF 4.7 BILLION EUROS IN 001)
INDICATES THE IMPORTANCE OF THE HIGH-SPEED AIL PROJECT IN
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PAGE 03 ROME 02912 02 OF 04 141436Z
FS' BUSINESS PLAN. WHILE ONLY THE FLORENCE - ROME LINK IS
YET OPERATIONAL, THE RAILWAY COMPANY EXPECTS TO COMPLETE THE
HIGH-SPED LINK FROM ROME TO NAPLES IN 2004, TURIN TO MILA
IN 2005, FLORENCE TO BOLOGNA TO MILAN IN 2007, ND GENOA TO
VENICE IN 2010. GRUPPO FERROVIARIO BEDA IS MANUFACTURING
THE FLEET OF SIXTY, 13-CAR,NON-TILTING TRAINS FOR USE ON THE
NETWORK.

STATE OF PLAY: MARKET LIBERALIZATION
--------------

9. (U) THROUGH THE CREATION OF TRENITALIA AND RFI, ITALY HAS
TAKEN A BIG STEP IN FORWARD IN PUTTING ITS RAILWAY SECTOR ON
A MARKET BASED STANDARD. NONETHELESS, THERE IS STILL A LONG
WAY TO GO. IN SEPTEMBER 2001, A FREIGHT TRAIN OWNED BY
FERROVIE NORD WAS THE FIRST, NON-FS TRAIN TO TRAVEL ON THE
ITALIAN RAIL NETWORK. TO BE ABLE TO PROVIDE RAILWAY SERVICE
IN ITALY, AN INTERESTED COMPANY MUST FIRST ACQUIRE A LICENSE
FROM THE MOT AND A CERTIFICATE OF SAFETY AND SECURITY FROM
RFI. WHILE APPROXIMATELY TEN COMPANIES (ALL CARGO PROVIDERS)
HAVE ACQUIRED THE REQUIRED LICENSE, ONLY FERROVIE NORD HAS
ACQUIRED BOTH THE NECESSARY LICENSE AND SECURITY
CERTIFICATE.


10. (SBU) REGARDING ANY FUTURE PRIVATIZATION, MOT DIRECTOR
GENERAL ENZO CELLI (AND OTHERS) EXPLAINED THAT THE GOI WOULD
NOT BE ABLE TO SELL ITS STAKE IN FS, OR ANY PART THEREOF, FOR
A PROFIT UNLESS FS COULD FIRST BE MADE MORE COMPETITIVE. HE
STATED THAT IT WOULD BE YEARS BEFORE THE RAILWAY SECTOR IS
READY FOR PRIVATIZATION AND THAT THE SECTOR WOULD
REQUIRE HEAVY INVESTMENT IN THE MEANTIME TO BE MADE MORE
ATTRACTIVE TO BUYERS. THIS INVESTMENT, HE EXPLAINED, IS
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PAGE 04 ROME 02912 02 OF 04 141436Z
BEING MADE THROUGH THE HIGH-SPEED RAIL PROJECT (AMONG
OTHERS). WITH AN EYE TOWARD A FUTURE MORE LIBERALIZED
MARKET, FS' SOPRANO TOLD US THAT HIS STRATEGY IS TO INCREASE
SHAREHOLDER VALUE BY INCREASING THE RAILWAY NETWORK'S
CAPACITY, IMPROVING EFFICIENCY IN RAILWAY OPERATIONS, AND
IMPROVING CUSTOMER SATISFACTION. HE CONCURRED WITH CELLI,
THAT INCREASED LIBERALIZATION (AND EVEN PRIVATIZATION) WILL
BE IMPOSSIBLE WITHOUT FIRST TAKING THESE STEPS.


11. (SBU) CELLI AND SOPRANO BOTH NOTED THAT WHILE THE GOI MAY
EVENTUALLY SELL SOME OR ALL OF ITS SHARE IN TRENITALIA, THEY
WOULD LIKELY KEEP RFI STATE-OWNED. THE PROVISION AND
MAINTENANCE OF RAILWAY INFRASTRUCTURE IS NOT A PROFIT MAKING
ENTERPRISE THAT CAN EASILY ATTRACT PRIVATE INTERESTS, AND THE
STATE DOES NOT WANT TO SEE A DETERIORATION OF SERVICES
COMPARABLE TO THE BRITISH.

MARKET OPENINGS FOR U.S. COMPANIES
--------------

12. (U) GIOVANNI SATTA OF FEDERTRANSPORTO, THE CONFEDERATION
OF ITALIAN TRANSPORT COMPANIES, BELIEVES THERE ARE MARKET
OPPORTUNITIES FOR U.S. FIRMS IN IT AND RAIL-TRAFFIC CONTROL
SYSTEMS. HE STATED, AND SOPRANO OF FS CONCURRED, THAT FS
INTENDS TO IMPROVE SERVICES THROUGH THE MODERNIZATION OF ITS

CONFIDENTIAL

CONFIDENTIAL PTQ2636

PAGE 01 ROME 02912 03 OF 04 141436Z
ACTION EUR-00

INFO LOG-00 MFA-00 AF-00 AID-00 CEA-01 CIAE-00 CTME-00
DODE-00 DOTE-00 WHA-00 SRPP-00 DS-00 EAP-00 EB-00
EXIM-01 OIGO-00 E-00 VC-00 FRB-00 H-01 TEDE-00
INR-00 IO-00 ITC-01 MED-07 AC-01 NEA-00 DCP-01
NSAE-00 NSCE-00 OMB-01 OPIC-01 ACE-00 SP-00 IRM-00
SSO-00 SS-00 STR-00 TRSE-00 USIE-00 SA-00 EPAE-00
DSCC-00 G-00 SAS-00 /015W
-------------- BD3F47 141438Z /38
R 141500Z JUN 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 4223
INFO EU MEMBER STATES COLLECTIVE
AMCONSUL FLORENCE
AMCONSUL MILAN
AMCONSUL NAPLES
DEPT OF COMMERCE WASHDC
DEPT OF TRANSPORTATION WASHDC

C O N F I D E N T I A L SECTION 03 OF 04 ROME 002912

SIPDIS

E.O. 12958: DECL: 06/05/2012
TAGS: ELTN KCIP KCIP KCIP KCIP IT ITELTN ITELTN ITELTN
SUBJECT: ITALIAN RAILWAY LIBERALIZATION AND SECURITY

ELECTRONIC AND INFORMATION TECHNOLOGY (IT) CAPABILITIES.
LIKEWISE, AS THE RAILWAY SECTOR LIBERALIZATION PROCESS
CONTINUES, U.S. FIRMS COULD PROVIDE SIMILAR PRODUCTS AND
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PAGE 02 ROME 02912 03 OF 04 141436Z
SERVICES TO NEW ENTRANTS IN THE ITALIAN RAILWAY MARKET. WE
ALSO BELIEVE THAT OPPORTUNITIES EXIST FOR U.S. COMPANIES IN
THE REGIONAL AND LOCAL PASSENGER AND CARGO MARKETS (REF. A).

SECURITY CONCERNS AND MEASURES
--------------

13. (C) ECONOFF MET WITH FS SECURITY MANAGER DAMIANO TOSELLI
AND, ALONG WITH POST'S TSA SECURITY LIAISON OFFICER (CASLO)
KARL BROWN, WITH FRANCO FIUMARA, DIRECTOR OF SECURITY OF RFI,
TO DISCUSS ITALIAN RAILWAY SECURITY POST-9/11. (FIUMARA WAS
ALSO A SPEAKER AT THE EMBASSY-SPONSORED CRITICAL
INFRASTRUCTURE PROTECTION CONFERENCE, SEE REF B.). TOSELLI
CHARACTERIZED THE ITALIAN RAILWAY NETWORK (INCLUDING THE
THOUSANDS OF KILOMETERS OF RAILWAY, TRAINS, TUNNELS,
STATIONS, PARKING FACILITIES, AND ASSOCIATED RESTAURANTS AND
SHOPS) AS HIGH-RISK INFRASTRUCTURE, SINCE IT CONSTITUTES AN
"OPEN" SYSTEM TO WHICH THE PUBLIC HAS ALMOST UNRESTRICTED
ACCESS. HE EXPLAINED FS' FOUR-PART PLAN TO PROTECT THE
RAILWAY SYSTEM FROM ATTACK: INTELLIGENCE INTEGRATION,
TECHNOLOGY IMPLEMENTATION, PROCEDURAL REVIEW, AND PERSONNEL
TRAINING. THIS PLAN, HE EXPLAINED, IS CARRIED OUT THROUGH
THE COMBINED EFFORTS OF ALL LAW ENFORCEMENT UNITS INVOLVED:
THE RAILWAY POLICE (PART OF THE NATIONAL POLICE FORCE), THE
RAILWAY COMPANY'S PRIVATE SECURITY FORCE, VARIOUS MUNICIPAL
POLICE FORCES, AND THE ITALIAN MILITARY.


14. (C) TOSELLI EXPLAINED IN DETAIL THE ACTIONS TAKEN IN
RESPONSE TO THE ATTACKS OF SEPTEMBER 11, 2001 TO HEIGHTEN
SECURITY ON THE RAILWAY NETWORK. THE NATIONAL RAILWAY POLICE
NOW CONDUCT INCREASED ONBOARD PASSENGER CHECKS, INCREASED
RAILWAY TRACK CONTROL WITH THE USE OF GROUND PERSONNEL AND
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PAGE 03 ROME 02912 03 OF 04 141436Z
HELICOPTERS, AND INCREASED EXPLOSIVE DEVICE CHECKS WITH
CANINE ASSETS. ITALIAN MILITARY FORCES SET UP INCREASED
GUARD SERVICES AND PATROLS AT SELECT BRIDGES AND TUNNELS AS
WELL AS AT KEY FACILITIES SUCH AS STATIONS AND MAINTENANCE
FACILITIES.


15. (C) THE ITALIAN RAILWAY CORPORATE SECURITY FORCE ALSO
TOOK ACTION, INCLUDING:
- PERFORMING A RISK EVALUATION, IN COOPERATION WITH PUBLIC
SECURITY FORCES, OF THE RAILWAY NETWORK'S FIXED ASSETS
(STATIONS, TUNNELS, AND BRIDGES),
- CLOSING THE SELF-SERVICE LUGGAGE DROP-OFF PROGRAM (NOW
MONITORED BY THE POLICE),
- UPDATING THE EMERGENCY ACTION PLANS OF BOTH STATIONS AND
RAILWAY OFFICES,
- INCREASING PRIVATE SECURITY GUARD AND PATROL SERVICES AT
STATIONS, ROLLING STOCK YARDS, AND CHEMICAL AND HAZARDOUS
MATERIAL YARDS,
- ENHANCING SECURITY MEASURES IN POSTAL SERVICE AREAS (X-RAY
CONTROL AND THE USE OF MASKS FOR EMPLOYEES),
- CONDUCTING COMMUNICATION AWARENESS SEMINARS FOR RAILWAY
SECURITY STAFF,
- SECURING INFORMATION TECHNOLOGY SYSTEMS IN THE RAILWAY
COMPANIES DATA ELABORATION CENTER AND TRAFFIC CONTROL CENTER
AND
- INCREASING RAILWAY STAFF TRAINING THROUGH SECURITY
AWARENESS SEMINARS AND EVACUATION DRILLS.


16. (C) FIUMARA SPOKE SPECIFICALLY OF THE DIFFICULTY OF
PROVIDING SECURITY FOR ITALY'S ENTIRE NATIONAL RAILWAY
INFRASTRUCTURE, INCLUDING OVER 16,000 KILOMETERS OF TRACK AND
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PAGE 04 ROME 02912 03 OF 04 141436Z
ALL RAILWAY STATIONS. HE AND POST'S CASLO SAID THAT THEY
WOULD CONSIDER INFORMATION AND PERSONNEL EXCHANGES IN THE
FUTURE.


17. (C) BOTH TOSELLI AND FIUMARA EXPECT INCREASED
PARTICIPATION AND INTEREST IN THE OCTOBER 2002 MEETING, TO BE
HELD IN ROME, OF COLPOFER (COLLABORATION OF RAILWAY POLICE
AND SECURITY SERVICES), THE TWENTY-NINE MEMBER ORGANIZATION
OF EUROPEAN RAILWAY COMPANY SECURITY OFFICIALS AND RAILWAY
POLICE FORCES DEDICATED TO INCREASED COOPERATION ON RAILWAY
SECURITY ISSUES. THEY SAID THAT THE EVENTS OF 9/11 HAVE
REVITALIZED WHAT WAS AT ONE POINT A LARGELY INACTIVE GROUP.
TOSELLI, THE CHAIRMAN OF COLPOFER, AND FIUMARA, THE SECRETARY
GENERAL, WILL HOST THE UPCOMING MEETING AND INVITED EMBOFFS
TO ATTEND AS OBSERVERS.

COMMENT
--------------

18. (SBU) THE OPTIMISM AND SECURITY-MINDEDNESS OF OUR FS
COUNTERPARTS GENUINELY IMPRESSED US. FS' ABILITY TO TURN A
PROFIT (HOWEVER SMALL), AND TO REIN IN THE SIZE OF ITS LABOR
FORCE, INDICATE THE POSITIVE DIRECTION OF ITALY'S ONLY
PASSENGER-RAIL CARRIER. THROUGH THE EVENTUAL COMPLETION OF
THE HIGH-SPEED RAIL NETWORK, FS MAY SOON BE ABLE TO COMPETE

CONFIDENTIAL

CONFIDENTIAL PTQ2637

PAGE 01 ROME 02912 04 OF 04 141436Z
ACTION EUR-00

INFO LOG-00 MFA-00 AF-00 AID-00 CEA-01 CIAE-00 CTME-00
DODE-00 DOTE-00 WHA-00 SRPP-00 DS-00 EAP-00 EB-00
EXIM-01 E-00 VC-00 FRB-00 H-01 TEDE-00 INR-00
IO-00 ITC-01 AC-01 NEA-00 NSAE-00 NSCE-00 OMB-01
OPIC-01 ACE-00 SP-00 SSO-00 SS-00 STR-00 TRSE-00
USIE-00 SA-00 DSCC-00 G-00 SAS-00 /007W
-------------- BD3F4C 141438Z /38
R 141500Z JUN 02
FM AMEMBASSY ROME
TO SECSTATE WASHDC 4224
INFO EU MEMBER STATES COLLECTIVE
AMCONSUL FLORENCE
AMCONSUL MILAN
AMCONSUL NAPLES
DEPT OF COMMERCE WASHDC
DEPT OF TRANSPORTATION WASHDC

C O N F I D E N T I A L SECTION 04 OF 04 ROME 002912

SIPDIS

E.O. 12958: DECL: 06/05/2012
TAGS: ELTN KCIP KCIP KCIP KCIP IT ITELTN ITELTN ITELTN
SUBJECT: ITALIAN RAILWAY LIBERALIZATION AND SECURITY

MORE DIRECTLY WITH THE ITALIAN AIRLINES WHICH, PLAGUED BY
DELAYS AND INCONVENIENCES, STAND TO LOSE PASSENGERS ALONG
COVETED INTRA-ITALY LINKS LIKE THE MILAN - ROME BUSINESS RUN.

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PAGE 02 ROME 02912 04 OF 04 141436Z

19. (SBU) A FULLY LIBERALIZED RAILWAY SECTOR AND AN ABILITY
BY TRENITALIA TO COMPETE IN A TRULY OPEN MARKET ARE GOALS YET
TO BE ACHIEVED. ITALIAN LABOR UNION OPPOSITION TO
LIBERALIZATION, AND THE ABILITY TO MAINTAIN PRESSURE ON THE
GOI, ENSURE THAT THE MOST COSTLY INPUT INTO FS' BUSINESS
EQUATION -- PERSONNEL -- WILL REMAIN A DRAG ON THE COMPANY'S
PROFITABILITY AND THAT OF ITS HOLDINGS. THIS IS TRUE FOR
OTHERS WHO WILL ATTEMPT TO CHALLENGE TRENITALIA IN THE
MARKET. FOR THE FORESEEABLE FUTURE, THEREFORE, FS' HOLDINGS
WILL REMAIN ITALY'S ONLY PASSENGER RAIL SERVICE PROVIDERS.


20. (SBU) WE PLAN ON ATTENDING THE OCTOBER 2002 COLPOFER
EVENT, WHICH COULD SERVE AS AN EXCELLENT FORUM IN WHICH TO
ENGAGE THE GOI AND ITALIAN PRIVATE SECTOR ON RAILWAY SECURITY
AND OTHER CRITICAL INFRASTRUCTURE ISSUES. WE WILL ALSO
INVESTIGATE THE POSSIBILITY OF ATTENDANCE BY WASHINGTON-BASED
OFFICIALS, AND WOULD APPRECIATE HEARING FROM THOSE INTERESTED
IN ATTENDING.
SEMBLER

CONFIDENTIAL

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2002ROME02912 - Classification: CONFIDENTIAL