Re­liance on Qatari in­vest­ment leaves Italy in quandary

The National - News - Business - - Analysis - Si­mone Filip­petti Si­mone Filip­petti is an eco­nom­ics jour­nal­ist for the Mi­lan news­pa­per Il Sole 24 Ore busi­ness@thena­

At the Ro­mazz­ino Ho­tel, there was un­usual ac­tiv­ity at the be­gin­ning of May. Staff were work­ing for the in­au­gu­ra­tion of the new sum­mer sea­son in Costa Smer­alda, the five-star lux­ury des­ti­na­tion on the is­land of Sar­dinia off the coast of Italy. His­tor­i­cally, the ho­tel opened in late May, which was a bit of shame for a place where the hot sea­son spreads from mid-April through to mid-Oc­to­ber.

The early open­ing is one of the changes brought by the new own­ers of the Costa Smer­alda, the sov­er­eign wealth fund of Qatar, the Qatar In­vest­ment Author­ity (QIA). The fund bought the ho­tel from the Le­banese-Amer­i­can in­vestor Tom Bar­rack for an undis­closed amount (re­port­edly €700 mil­lions, in­clud­ing debt).

Ev­ery year, VIPs and bil­lion­aires gather at the Costa Smer­alda – the list in­cludes the Rus­sian steel mag­nate Alisher Us­manov and Bill Gates.

Qatar Air­ways, mean­while, owns a ma­jor­ity stake in Merid­i­ana, the Sar­dinian air­line fo­cused on tourism.

Ro­mazz­ino, a white­washed min­i­mal­ist build­ing in the shape of a pre­his­toric Sar­dinian cave, is one of the five ho­tels in the Costa Smer­alda. The oth­ers in­clud­ing the Cala di Volpe, which has served also as a James Bond film lo­ca­tion, and the world­class golf club Pevero.

But the good news of the early open­ing is off­set by bad news: Ital­ian pros­e­cu­tors are in­ves­ti­gat­ing the sale of the Costa Smer­alda. Mr Bar­rack, a fi­nan­cial sup­porter of the US president, Don­ald Trump, has al­legedly de­frauded the Ital­ian tax sys­tem.

Nev­er­the­less, fis­cal is­sues in Sar­dinia could be the least of the prob­lems fac­ing Qatar. The coun­try has been for some weeks em­broiled in a dis­pute with its Ara­bian Gulf neigh­bours: its bor­der with Saudi Ara­bia, the only one on the main­land, is closed. This could bring ma­jor dis­rup­tion for Doha and its eco­nomic in­ter­ests abroad. Qatar has in­vested a lot in Europe, and es­pe­cially in Italy where it is be­lieved to have spent about €6 bil­lion in re­cent years.

At the same time, Italy is build­ing the new Qatar: con­trac­tors such as Salini Im­pregilo, Con­dotte and Per­mas­teel­isa are in­volved in build­ing the sta­di­ums and in­fra­struc­ture for the 2022 World Cup. So Italy is also look­ing very care­fully at what’s hap­pen­ing in the Gulf. Some of the coun­try’s ma­jor as­sets rely on Qatar.

The pre­vi­ous emir, Sheikh Hamad bin Khal­ifa Al Thani, started his in­vest­ment cam­paign in Italy with the lux­ury mai­son Valentino. The haute couturier was bought in 2007 for more than €700m: at the time Valentino was be­lieved to be a present for his wife Sheikha Mozah. Whether the ru­mour is true or not, Valentino proved to be a good in­vest­ment: the com­pany is val­ued above the price Qatar paid.

The over­all pref­er­ence for Doha was in­vest­ment in real es­tate as­sets, namely ho­tels. The list of ho­tels that the QIA has in­vested in is long; it in­cludes the Gal­lia Ho­tel, a his­toric lux­ury ho­tel in down­town Mi­lan that needed €100m of ren­o­va­tion, Palazzo Gritti in Venice and oth­ers. The best ho­tel in Qatar’s port­fo­lio is prob­a­bly the Ex­cel­sior in Rome, in the Via Veneto – the area where Fed­erico Fellini’s1960 film La Dolce Vita was filmed. It faces the US em­bassy, con­sid­ered to be one of the most im­pres­sive build­ings in Rome, and it is also fa­mous for an over­the-top suite that fea­tures a pri­vate screen­ing room. Ho­tels, flights and re­sorts are all part of a strate­gic plan sur­round­ing the tourism in­dus­try in Italy.

Qatar has also come to the aid of the city of Mi­lan. The sleek com­plex of Porta Nuova, which made the Mi­lan sky­line sim­i­lar to Man­hat­tan’s, was in peril, was destined to re­main an un­fin­ished con­crete skele­ton. But the QIA bought the en­tire real es­tate de­vel­op­ment project for €2bn, avoid­ing a big bad prob­lem for the city that at the time was host­ing Expo 2015. To­day, the Porta Nuova sky­scraper, which is the tallest in Mi­lan, is the headquarters of UniCredit, Italy’s sec­ond-largest bank, in which Abu Dhabi’s Aabar is a ma­jor share­holder.

So far, no­body in Italy is re­gret­ting do­ing busi­ness with Qatar: most re­cently Italy’s gov­ern­ment knocked at the doors in Doha look­ing for help to save two trou­bled Ital­ian re­gional banks. But in­ter­na­tion­ally iso­lated Qatar would re­quire Italy to solve a puz­zle: where to find an­other for­eign in­vestor so keen to put its money in La Dolce Vita na­tion.

Fis­cal is­sues in Sar­dinia could be the least of the prob­lems fac­ing Qatar

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