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By Syed Nazakat

The marines row has happened at a time when India’s ties with Italy are already under strain. The Italian government, by refusing to share details about its investigation in the Finmeccanica case, despite repeated requests from India, has put Defence Minister A.K. Antony in a spot. If the government decides to reduce or snap relations with Italy, Finmeccanica, the second largest Italian industrial group, could become the immediate target.

Finmeccanica and its subsidiary AgustaWestland are under the scanner for the kickbacks allegedly paid in the VVIP helicopter deal. If the company is blacklisted, it would be banned from operating in India for five to 10 years. Over the years, Finmeccanica has increased its presence in India by developing crucial partnerships with Indian defence producers like Bharat Heavy Electricals Ltd, Bharat Dynamics Ltd, Bharat Electronics Ltd, Hindustan Aeronautics Ltd, and the Tata Sons group.

Whitehead Alenia Sistemi Subacquei (WASS), one of Finmeccanica’s subsidiaries, is selling Black Shark torpedoes for Indian Navy’s Scorpene submarines. This big-ticket deal is in its final stage, and Antony said in Parliament last week that the government had not taken a final decision about it. Ansaldo STS, another subsidiary of the group, is developing Indian Railway’s protection and warning system. The company is engaged in a massive project that includes Kolkata Metro and the Delhi-Agra rail section.

Some 400 Italian companies are located in India, either through subsidiaries or joint ventures with local companies. Italian exports to India have almost doubled in the last few years. The bilateral trade stands at around 7.2 billion euros, which makes Italy India’s fourth largest trading partner among the EU countries. 

With constantly increasing foreign direct investments (FDI), Italy’s market presence in India is all set to grow. “We had strong connections in the past, but somewhere in between a time came when we were not so close,” Italian Ambassador Daniele Mancini told reporters in Kolkata. “We have to revive our ties and increase joint venture and investment in the coming years as we aim at doubling our trade with India by 2015.” 

But now, all the business and bilateral ties hinge on the ongoing diplomatic row. Italy’s refusal, first to share details about its investigation, and now to send back the marines may win the Italian government brownie points back home, but has created a major international controversy. This becomes even more significant because of a public perception that the current controversy is an outcome of a deal involving the Italian marines issue and the AugustaWestland chopper deal that went awry.

THE WEEK, March, 2013

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