1. (S) Summary: MFA officials told PM DAS Suchan and JCS BG
Remington that while Italy is "not out in front" it will
likely join EU consensus to lift the China embargo, assuming
that a review of China's human rights situation shows that
"the conditions are right." PM Berlusconi's diplomatic
advisors took a different tack, suggesting that Italy would
work with the US to ensure the embargo would not be lifted if
shared strategic interests would be compromised. End summary.



2. (S) MFA officials took a fairly hard line on Italy's views
regarding upcoming China Arms embargo discussions in
Brussles. Deputy Director for Multilateral Political Affairs
Claudio Bisognero, Acting Asia DG Cristina Ravaglia, EU CFSP
Director Luigi Mattiolo and Armaments Authorization desk
officer Enrico Padula reiterated that while Italy is "not out
in front" it will likely join EU consensus to lift the
embargo, assuming that a review of China's human rights
situation shows that "the conditions are right." Bisognero
and Mattiolo urged the USG to work with the EU to ensure that
the improved EU Code of Conduct and "toolbox," currently
under discussion in Brussels, address concerns underlined by
DAS Suchan regarding the potential for creating a strategic
imbalance in the China Sea/Taiwan Straits. When asked how a
Code with worldwide scope could be improved to be the
functional equivalent of a country embargo, Mattiolo
suggested that the EU, Russia, Israel and US coordinate on
common guidelines for arms transfers to China.



3. (S) PM Berlusconi's diplomatic advisors for Europe,
Francesco Talo, and for Asia, Paolo Dionisi, had a somewhat
more understanding view of the difficulties that lifting the
embargo would cause for US strategic interests, and
ultimately for US-EU relations. Dionisi said Italy has to
strike a balance between trade and political considerations.
Talo said Italy will not support lifting the embargo unless
China's human rights are "respected" and unless it is clear
that removing the embargo would not increase China's security
threat. They both suggested that Italy will cooperate
closely with the US in working to convince its EU partners
not to lift the embargo if shared strategic/military concerns
would be compromised. "We will do our best" in Brussels,
promised Dionisi. Dionisi and Talo agreed that the EU Code
of Conduct had serious shortcomings, and acknowledged that
the embargo provided political cover for countries that want
to say no to arms deals with China. They also acknowledged
the possibility that lifting the EU embargo would spur non-EU
countries such as Russia and Israel to exercise less
restraint in arms deals with China. Dionisi emphasized that
"at the end of the day, you know we are with you on political
military issues."



4. (S) Dionisi reacted most to the potential impact on
US-Italy defense cooperation. In this context, he brought up
the Augusta/Westland effort (teamed with Lockheed Martin) to
supply the new Presidential helicopter for the White House
fleet. He said he had heard reports that DOD had delayed the
decision in order to give US manufacturer Sikorsky more time
to improve its bid. DAS Suchan emphasized that the decision
on the helicopter had not been made, but more importantly,
that if the embargo were lifted, the US Congress would very
likely impose restrictions on technology transfer to Europe,
making future cooperation on other projects, such as the
Joint Strike Fighter, very difficult.



5. (S/NOFORN) COMMENT: The comments by MFA officials to
DAS Suchan and BG Remington were less encouraging than we
have heard before, while the more positive remarks from
Berlusconi's diplomatic advisers were the first concrete
statement we got from the PM's office after several months of
working the issue. We need to close the clear daylight
between Prime Ministry and MFA views by persuading PM
Berlusconi of the importance the US attaches to this issue.
Persuading the Italians to take up our cause in Brussels may
require a direct order from Berlusconi to Foreign Minister
Frattini (a Powell-Frattini pull-aside may occur in


Washington Oct. 14-16). At this point, key Italian officials
have heard all our arguments, but are only likely to be moved
toward our position by a direct message from a high NSC
official to Berlusconi's senior Diplomatic Adviser, Giovanni
Castellaneta, putting the priority of this issue in the
context of the close working and personal relationship
between PM Berlusconi and President Bush. End Comment.



6. (SBU) DAS Suchan and BG Remington have cleared this
message.

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2004ROME03958 - Classification: SECRET