ITALIAN RAILWAY LIBERALIZATION AND SECURITY

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 CONFIDENTIAL 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. CONFIDENTIAL 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 PAGE 01 ROME 02912 02 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 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 CONFIDENTIAL PAGE 02 ROME 02912 02 OF 04 141436Z 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 CONFIDENTIAL 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 CONFIDENTIAL 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 CONFIDENTIAL 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 CONFIDENTIAL 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 CONFIDENTIAL 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. CONFIDENTIAL 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 > 2002ROME02912 - Classification: CONFIDENTIAL