Checkpoint Asia

Italy Suspends F-35 Orders, Owes US €0.5 Billion

Rome is deeply split over whether it still wants the planes, Defense Minister wants to cancel most of them

“Populist” Italy diverging from the US on everything from China and the Silk Road, Huawei and the 5G network, Venezuela, troops’ withdrawal from Afghanistan, ties with Russia, to its energy policy

After the Chinese Silk Road, the next problem will be the F-35 jet fighter aircrafts: Not only because Italy has reduced its defense spending, but because it’s hasn’t paid for the F-35 fighter jet aircrafts it already ordered, for a total 500 million euros in arrears. In a meeting last week, the Supreme Defense Council called on President Mattarella to fulfil its commitments.

This appears to be the last piece in what is looking like a geopolitical paradox: The Trump administration has praised the populist government and would like to strengthen its relations with Rome, especially given its position Europe, what with the problems in France, Germany and the United Kingdom distracted by Brexit.

On the ground, however, Italy is complicating the bilateral relationship, assuming positions that diverge from the United States’ common interests on almost all key themes, like China and the Silk Road, Huawei and the 5G network, Venezuela, troops’ withdrawal from Afghanistan, ties with Russia, and its energy policy.

At first, Rome committed to buying 131 F-35 fighter jets for 13.5 billion euros, but in 2012, Italy announced plans to cut its order to 90 from the 131 originally agreed in 2002, saving the country some five billion euros. Meanwhile, the overall costs almost doubled, and several technical problems with the aircraft emerged.

Now, Italian Minister of Defence Elisabetta Trenta is conducting a “technical evaluation”, which could reduce the orders to a couple of dozen aircrafts. Washington would remain very disappointed, not only because it considers the F-35 a common transatlantic project essential to keep our defenses in step with the times, but also because the reduction of purchases by a country would increase costs for all others.

The US emphasizes that Italy would lose more than it would save, because around 80 companies in our country are involved in the project, the Cameri military airfield has been chosen as a logistics and maintenance hub for final assembly of the F-35 fighter jet, and the entire operation should generate jobs (initial estimates were between 3,586 and 6,395 jobs). [so that’s 5,000 jobs for $7 billion (!) spent]

Washington is of a different mind when it comes to Italy’s political choice to cut defense spending. But regardless of a slow down of orders, the real outrage to both the US government and of the parent company, Lockheed, is that since March last year, Rome has suspended payments for the 11 F-35 jets that have already been delivered and the nine others it ordered.

One aircraft, for example, is ready to be delivered to Cameri for assembly, but it remains in the hangar because there are about 20 million in arrears. The total outstanding debt has now reached 500 million euros. This was one of the points raised by the Supreme Defense Council, when last week’s communiqué stressed “the character of continuity, including financial, which must necessarily characterize the modernization programs that develop over particularly long time frames”.

The problem is not just the reduced F-35 orders or the 500 million euros in arrears, but the credibility of the country. How can we, American sources ask, persuade our companies and our financial creditors to invest in Italy and buy your debt, if you don’t even guarantee the certainty of being paid?

Boeing, for example, builds the 787 Dreamliners in Grottaglie, and could increase orders with the launch of new models. Leonardo is competing for dozens of helicopters to be delivered to the Navy. But all this is complicated by the F-35 case, and also by Italy’s choice to sign the agreement with China for the Silk Road, which could instead end the road to US access.

Source: La Stampa