Reliance on Qatari investment leaves Italy in quandary
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