Egypt: Italy spat and the inevitable questions about ENI

The brutal murder of Giulio Regeni, an Italian doctoral student, in Egypt in January 2016 is threatening the once close relations between Cairo and Rome, with speculations the Egyptian security services might be involved.

Since he came to office in June 2014, President AbdelFattah al-Sisi has forged close ties with Italian Prime Minister Matteo Renzi. Italy is Egypt’s first European trade partner (and the second overall, after the U.S.). Back in November 2014, Prime Minister Renzi hailed Egypt as a “strategic partner” during a visit to Rome by President Sisi (his first official visit to Europe after his accession to power), at a time many western countries viewed the new Egyptian regime with a certain apprehension. Regeni’s killing came just as business, political and security cooperation between Italy and Egypt were being ramped up.

Souring relations between Italy and Egypt have not affected ENI’s operations in Egypt yet, though the subject is increasingly being brought up. Despite cutting short a visit to Cairo by a high-profile Italian trade delegation after Regeni’s body was found, Italian authorities do not appear to be willing to use corporate relationships to put pressure on Egypt, at this point.

In this 1,175-word analysis, reserved to its clients, MESP addresses the following points:

How long could this situation persist, and how far could it go, before Italian companies operating in Egypt, and ENI in particular, start to feel the impact of the deteriorating relations between Egypt and Italy?

Over the past few years, ENI’s relations with Egypt underwent ups and downs. After the discovery of Zohr in August 2015, President Sisi requested then-Petroleum Minister Tarek el-Molla to “overcome all obstacles” in the way of Eni and its activities in Egypt. The harmony between the two sides allowed ENI to speed up work in Zohr. Will ENI still enjoy the same operational advantages?

How far can Egypt go in disturbing the work of Italian companies operating in Egypt, and ENI in particular?

Sisi’s strategy of diversifying foreign partners (Italy, but also GCC, France, Russia etc.), as opposed to relying on a single partner as was the case under Hosni Moubarak’s regime, may prove to be beneficial. Will the deteriorating relations with Italy encourage a third party to step in? Or does this incident on the contrary prove that country risk is too high?

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