ITALIAN ARMS SALES: POLICIES AND PROSPECTS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83B00851R000200030002-0
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 21
• Document Creation Date: December 21, 2016
• Document Release Date: August 26, 2008
• Sequence Number: 2
• Publication Date: September 1, 1982
• Content Type: REPORT

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Intelligence
Italian Arms Sales:
Policies and Prospects
DIA review
completed.
State Dept. review completed
Secret
GI 82-10177
September 1982
Copy 3 Q / 2
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Directorate of Secret
Intelligence
Italian Arms Sales:
Policies and Prospects
This paper was prepared by
Office of Global Issues. Comments and queries are
welcome and may be directed to the Chief,
Weapons Proliferation Branch, International Security
Issues Division, OGI, telephon
This paper has been coordinated with the National
Intelligence Council and the Directorate of
Operations.
Secret
GI 82-10177
September 1982
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Secret
Italian Arms Sales:
Policies and Prospects
Key Judgments Permissive arms export regulation, extensive licensing and coproduction
agreements, and the desire of many Third World states to reduce their
dependence on great-power military assistance have made Italy a major
arms exporter. With sales totaling more than $6.7 billion in the past six
years, triple the sales of the previous six years, Italy now ranks fourth
among West European suppliers and sixth worldwide.
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We believe Italy's market share will stabilize in the next few years as
increased competition and changing market demands limit sales opportuni-
ties. Heightened international tensions will prompt many LDCs to resort to
assistance and sophisticated arms from traditional suppliers-the United
States, USSR, France, and Britain. The absence of a high-performance
aircraft in the Italian inventory will also hinder sales. Italian arms
manufacturers may find some relief in additional sales to Libya, Argenti-
na, and Taiwan, and to other customers who prefer the low political profile
and moderately sophisticated technology of Italian arms.
Washington can expect an increase in Italian requests for:
Foreign Military Sales (FMS) financing of Italian arms sales.
Approval for sales of weapons produced under US license.
US purchases of Italian weapons systems.
Meeting these requests might entail a reduction in direct US sales to pro-
Western Third World states and members of NATO's southern flank.
While Italian sales to pariah and radical Third World states may on
occasion conflict with US policy, they also could serve US interests when
Washington wishes these nations to receive Western security assistance but
does not want to take the lead. 25X1
Information available as of 13 August 1982
has been used in the preparation of this report.
Secret
GI 82-10177
September 1982
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Key Judgments
Scope and Magnitude
Arms Customers
Equipment Sales
Motivations and Development
Competitive Factors
Organization and Practices
Ownership
Regulation
Promotion
Market Prospects
Implications for the United States
Appendixes
A.
Italian Arms Sales and Services
Ownership of the Italian Arms Industry
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Italian Arms Sales:
Policies and Prospects
drop in sales to less than $400 million
Scope and Magnitude
Italy is the sixth-leading arms supplier in the world,
having sold more than $6.7 billion worth of military
equipment and services in 1976-81, almost tripling
sales of the preceding six years (figure I ).' Sales tend
to fluctuate yearly reflecting a few major transac-
tions-such as the $1.9 billion Iraqi sale in 1980
rather than continuing sales to many countries. Stiff-
ening competition last year and a general decline in
Third World arms purchases resulted in a precipitous
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radical Arab states, particularly Iraq and Libya, have
come to view Rome as an alternative to the superpow-
ers and traditional European arms exporters - for a
wide range of military equipment and services. The
Middle Eastern market now accounts for more than
65 percent of Italian arms sales (figure 2). The $1.9
billion sale of warships to Iraq in 1980 was the largest
Italian arms deal and made Iraq the principal recipi-
ent of Italian military equipment. Libya, Italy's sec-
ond-largest customer, has purchased a variety of
equipment, including turboprop trainer and transport
aircraft. Rome has also sold small amounts of elec-
tronic equipment and tanks to some of the smaller
Persian Gulf states.
Sub-Saharan Africa and Latin America account for
almost 20 percent of Italian arms sales. Somalia, in
part a former colony, is the major Sub-Saharan
customer, having received transport aircraft and
ground forces equipment
In Latin America. Italy has successfully
these estimates as accurate, but, because of the difficulty of
confirming individual transactions, they may not be complete.
' Appendix A details sales of Italian military equipment and
services. Arms sales data are from all-source collection. We regard
Figure 1
Average Annual Italian Arms Sales
Million US S
1,400
1,200
1.000
800
600
to Ecuador, Peru, and Argentina. Brazil produces
Italian jet trainer aircraft under license and, accord-
ing to trade journals as helped
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fund the new AMX jet fighter, which it will also
produce. 25X1
Italy has had little success in selling weapons to its
NATO allies. Much of Italian military equipment is
produced under European or US license, and sales to
NATO members are usually restricted by marketing
agreements.
Italian-designed equipment has faced stiff competi-
tion from superior foreign weapons systems or has 25X1
been blocked by preferences for domestic products.
Italian officials have complained that the Italian-US
1978 Memorandum of Understanding on Cooperation
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Figure 2
Italian Arms Sales by Region, 1976-81
Percent
Europe and
North America 7
Figure 3
Italian Arms Sales by Type, 1976-81
Percent
in the Research, Development, Production, and Pro-
curement of Defense Equipment has produced few
concrete results. Like all NATO allies, Rome wants a
more equal two-way street in transatlantic arms sales.
Italy has not com-
peted for sales to China in the past in order to avoid
endangering its substantial commercial ties with the
USSR and creating political complications with the
Italian Communist Party.
Equipment Sales. Because of the 1980 sale of 1 1
warships to Iraq, Italian arms sales show a preponder-
ance of naval equipment (figure 3). When this Iraqi
sale is removed from the total, Italian arms agree-
ments show a more balanced distribution among
fixed-wing aircraft, helicopters, ground forces equip-
ment, and small naval combatants (figure 4). The
armored personnel carriers.
relatively low percentage of aircraft sales (only 38
percent compared with 63 and 41 percent for France
and Britain) reflects the absence of expensive, high-
performance fighters in Italy's inventory. Aircraft
sales consist primarily of trainers such as the
Aermacchi MB-326 and the SF-260, which are popu-
lar among Third World nations because they can be
converted to perform light attack and counterinsur-
gency missions. Helicopters make up 17 percent of
sales and in most cases are produced under US
license. Ground forces materiel covers a wide range of
equipment, including small arms, trucks, tanks, and
Italy also provides technicians and training for foreign
customers, mainly those in the Middle East. Most
training is provided as part of an arms-sale package
although it is occasionally provided free in a new
market. Technicians provide limited in-country main-
tenance and some training, usually under direct con-
tract. Major overhauls of equipment and extensive
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Figure 4
Italian Sales by Type, 1976-81'
Percent
other 16 -
Electronics II - -
Naval vessels 13-
Helicopters 17 -
training of foreign personnel take place in Italy. We
suspect that Rome uses these opportunities to develop
close relations with foreign officers and enlisted men
in the hope that they will favor Italian military and
commercial manufactures.
Motivations and Development
Italy began to rebuild its defense industries in the
1950s in support of NATO goals for the rearmament
of Europe. Firms such as Fiat, which were capable of
producing ground forces equipment, were the first to
begin military production. Later, shipbuilding, elec-
tronics, and aerospace manufacturers were added to
the defense sector, often through the kit assembly and
licensed production of foreign weapons systems.
Italy's arms export business remained largely oriented
toward Western Europe until the energy crises and
trade deficits of the early 1970s compelled Rome to
seek markets in the Third World.
~conomics has be-
particular, Italy has attempted to reduce its balance-
of-payments problems with its major oil suppliers by
selling arms. Arms agreements with Iraq, Libya,
Saudi Arabia, and with other oil producers have often
been accompanied by lucrative contracts for construc-
tion and nonmilitary industrial development projects.
Italian arms manufacturers have further enticed these
customers to invest directly in their corporations or to
underwrite indirectly the development costs for new
weapons systems.
develop an AWACS version of the G-222 transport
aircraft, which it intends to purchase.
According to Italian defense officials, arms exports in
the past six years have made the defense industries a
profitable and growing sector of the economy. They
have helped Italy to expand its industrial base, skilled
labor pool, and technological capability, as well as to
reduce the unit costs of military equipment, given the
limited needs of the Italian armed forces. Arms
manufacturers export 80 percent of their production,
which accounts for almost 3 percent of total Italian
manufactured exports. The defense industries employ
300,000 workers, approximately 1 percent of the
national labor force.
In addition to promoting national economic objec-
tives, Italian officials have used arms sales to promote
Western political and security interests. According to
State Department reporting, Rome is sensitive to the
problem of maintaining Western influence in the
Third World. In NATO discussions, for example,
Italian diplomats have pointed to their sales to radical
LDCs as a means of preserving a foothold in a Soviet-
dominated market. Italy has also assisted pro-
Western countries during crises. State Department
reporting indicates that Rome considered expediting
the delivery of armored personnel carriers to Somalia
during its recent conflict with Ethiopia.
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to Third World customers who want to protect their
nonaligned status and diversify their inventories while
maintaining access to the defense industries of the
industrialized world
Italy does not overestimate its ability toinflu-
ence the military and political activities of client
nations. We have no reports, for example, of Italy
attempting to tie arms supplies to basing rights or
security cooperation agreements.
Italy's attractiveness as an arms supplier has been
enhanced by its close association with the defense
industries of its NATO allies (table 1).
Italy has been a e~m
complement domestic industrial capabilities with ex-
perience from its relationships with foreign manufac-
turers to design, develop, and produce weapons sys-
tems tailored to Third World needs:
The Agusta company has applied bonding tech-
niques acquired in the licensed production of Boeing
CH-47 helicopters to the manufacture of the S.211
jet trainer, which is produced by its subsidiary Siai
Marchetti.
o.Aermacchi, another aerospace firm, has used its
experience in the Trinational Tornado fighter air-
craft program in the design of the AMX export
fighter.
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In the manufacture of missiles, Oto Melara, which
coproduced the Otomat antiship missile with Martel
of France, is now developing an indigenously de- 25X1
signed antiship missile, the Otomach, with the
Italian firm, Alfa Romeo Aviation.
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Oto Melara has used its experience in the licensed
production of the West German Leopard I tank to
produce with Fiat the OF-40 tank. This vehicle,
designed specifically for export, is heralded by its
manufacturer as the first Italian designed and pro-
25X1 duced tank since 1945, despite its striking resem-
blance to the Leopard I.
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transport with British engines.
Licensed production and the incorporation of US
components in Italian weapons systems have caused
nagging problems for Italy. Washington's refusal to
approve the transfer of US-manufactured equipment
or Italian equipment produced under US license-
F-104s to Equador, CH-47s to Iran, and US-engined
G-222 transport aircraft to Libya-probably weak-
ened Italy's reputation as a reliable arms supplier.
State Department reporting indicates that the need to
request US approval for third-party transfers has
caused the loss of several contracts. Italy, for exam-
ple, has not been able to meet several Iraqi requests
for US-designed equipment produced or exported by
licensed Italian manufacturers. Italian manufacturers
arc unhappy with the limited markets accorded them
under standard US licensing agreements and, accord-
ing to press reports, are increasingly
turning to Western Europe for participation in code-
velopment programs. Moreover, some Italian firms
have begun to substitute West European or indige-
nously produced equipment for US-made components
in their weapons systems. Aeritalia, for example, has
equipped its AMX fighter and a version of its G-222
' The AMX does, however, have US-designed engine and fuel
indicators and a heads-up display, which may be replaced in export
Organization and Practices
Ownership. Like most of its European neighbors,
Italy's defense sector is owned primarily by the
government, although industrial centralization and
rationalization have not been carried as far as in
France and Britain. About one-third of the Italian
defense sector is privately owned. For example, FIAT,
Montedison,' and their subsidiaries continue to be
important, privately owned manufacturers of armored
vehicles, missiles, and electronic equipment. Govern-
ment ownership of the arms manufacturers is orga-
nized through two large holding companies under the
Ministry for State Participation-the Institute for
Industrial Reconstruction (Istituto per la Ricostru-
zione Industriale-IRI) and the State Holding and
Finance Company for the Manufacturing Industry
(Ente di Partecipazione e Finanziamento Industria
Manufacturiera EFIM).s The holding companies
have attempted to integrate the arms manufacturers
into the nation's economic plans and to enhance their
competitiveness, in part by engaging in market re-
search and promotion. According to pres
reports, they have been able to market their products
effectively because they can offer foreign customers a
complete trade package that includes both military
and nonmilitary goods and services-construction,
nuclear power equipment, and civilian manufactures.
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Table 1
Italian Coproduction and Licensing Agreements
United States, Belgium, Netherlands, Norway,
West Germany, Denmark
1968
Production
OTOMAT (ASM)
France
1969
Production
FH-70 field gun
West Germany, United Kingdom
1968
Production
SP-70 field gun
West Germany, United Kingdom
1973
Prototype
RS-80 rocket system
West Germany, United Kingdom, United States
1978
Design
Hydrofoil
West Germany, United States
1972
Production
Sea Guard naval fire control system
Switzerland
1978
Design
Fighter (F-104 Starfighter)
United States
1966
Production
Transport (C-119)
United States
1955
Production ended
Helicopter (Bell models)
United States
1952-75
Production
Helicopter (Sikorsky models)
United States
1965
Production
Helicopter (Boeing CH-47)
United States
1968
Production
Helicter (Hughes models)
United States
1970
Production
Air-to-air guided missile (Sparrow 111)
United States
Production
Air-to-air guided missile (AIM 9L Side-
winder)
United States
1978
Production
Surface-to-air guided missile (Improved
HAWK)
United States
1960
Production
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The holding companies permit individual arms manu-
facturers considerable autonomy in their day-to-day
affairs. According to trade journals, this management
approach fosters entrepreneurship, but it also pro-
duces competition for industry dominance and foreign
sales. For the past few years EFIM and IRI have
competed, directly and through subsidiaries, for con-
trol of Italy's aerospace business. Agusta of EFIM
and Aeritalia of IRI, for example, have both market-
ed jet trainer aircraft that directly compete with each
other for foreign orders.
Press reports indicate that IRI and EFIM also protect
inefficient producers threatened with bankruptcy by
purchasing minority shares of their stock. A subsid-
iary of IRI, the Holding and Participation Company
(Gestione E Partecipazione Industrali-GEPI), has a
charter to buy up failing companies, improve their
financial condition, and return them to the private
sector. This practice has permitted a multitude of
inefficient arms manufacturers to exist. Recently,
both GEPI and Agusta purchased stock in OMI, a
debt-ridden navigation and aeronautic instrument
Regulation.
=Italian arms exports are regulated in an ad hoc
process that favors the military and defense industri-
alists. After initial marketing research, firms are
required to obtain government permission to initiate
negotiations with foreign customers. If a deal is
consummated, an export license must be obtained
from a special interagency committee established in
1975 to oversee arms transfers. The Ministries of
Defense, Foreign Affairs, Finance, Foreign Trade,
Industry, and Interior are represented. All committee
decisions must be unanimous, but the committee's
casual operations, effective cooperation among work-
ing-level bureaucrats and the military, and the domes-
tic political power of corporate leaders guarantee the
success of most applications.'
End-user certificates, which prohibit equipment trans-
fers to third parties, are required by Italian law, but,
according to media they are
commonly waived, falsified, or ignored. These certifi-
cates often become a problem for exporters when the
equipment is produced under license by an Italian
manufacturer who wishes to sell to a customer outside
of the markets granted to him by the foreign licenser.
The destination cited in the certificate is sometimes
falsified to finesse this problem. The relaxed nature of
the process was best revealed last year in parliamenta-
ry debates when the Minister of Defense defended the
sale of naval guns to Israel-which then transferred
them to South Africa-by noting that Rome could
not control what sovereign governments did with
military equipment once it was delivered.
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2i ci
Rome's laissez-faire attitude is often cited in press 25X1
reports and Italian political debates as a factor con-
tributing to its role as an intermediate exporter for
foreign manufacturers whose domestic legal systems
impose tough restrictions on arms exports. For exam-
ple, the Swiss gun manufacturer Oerlikon Buhrle has
established two subsidiaries in Italy that deal largely
in the Third World market. In addition, Italian press
sources assert that several US and West European
arms manufacturers have purchased large shares of
Italian defense industries for better access to Third
World markets (table 2).
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Table 2
Foreign Ownership of Italian Defense Industries
Fabbrica Italiana Apparechi Radio, SpA
General Electric (United States)
Avionics
Marconi Italia
GE, Ltd. (United Kingdom)
Electronics
Oerlikon Italiana
Oerlikon Buhrle (Switzerland)
Cannon and rockets
Rockwell Collins Italia
Rockwell International (United States)
Aircraft parts
Sistel
Oerlikon Buhrle (Switzerland) e
MTU Munich (West Germany) and Rolls-Royce
(United Kingdom) a
Promotion. While most sales are concluded by corpo-
rate executives, who give highly personalized service
to foreign buying agents, the Italian Government
apparatus assists industry in its marketing
the Ministry for State Participa-
tion, which supervises the major holding companies,
has begun to directly negotiate arms contracts. The
Ministry of Foreign Affairs is also involved, providing
a coordinating service in an attempt to prevent compe-
tition between Italian firms for the same contracts.
Weapons demonstrations are provided by the Minis-
try of Defense which,
has also diverted to foreign customers equipment
earmarked for the Italian armed forces when quick
delivery was necessary to clinch a deal. This ministry
also assists quasi-private marketing associations, such
as the Melara Club (surface naval vessels) and the
Trieste Club (submarines), in the organization of
promotions such as the Genoa Naval Show. The
Melara Club has had remarkable success in selling
warships to several states, but the Trieste Club has
not sold a submarine since its inception in 1977. C-
According to State Department reporting, the Italian
Government also supports arms sales by providing
generous export credits. Mediocredito Centrale, a
government bank, extends credits at rates as low as
7 percent when giving aid. This subsidy gives manu-
facturers a competitive edge, especially when dealing
with LDC clients who have lower performance stand-
ards for equipment and often purchase weapons pri-
marily on the basis of price. Italian law does require,
however, a downpayment of at least 15 percent. In
addition, the government-run Special Section for Ex-
port Credit Insurance (Sezione Special per l'Assicura-
zione del Credits all'Esportazione-SACE) insures
exports, including arms, against political and com-
mercial risks. This service is particularly important to
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Trieste Club
CNR-Italcantieri
Ansaldo
ELSAG
Grandi Motori Trieste
Ercole Marelli
Riva Calzoni
USEA
Whitehead Motorfides
Melara Club
Cantieri Navali Riuniti
Grandi Motori Trieste
Fiat Aviazone SpA
Oto Melara
Breda Meccanica Bresciana
ELSAG
Electtronica
Montedei-Elmer Division
I
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arms manufacturers who deal primarily with Third
World countries where the risks of sudden financial
loss and contract interruption are high.
Market Prospects
We believe that over the next two to three years Italy
will only be able to maintain, or at best marginally
increase, its market share. Italian sales to Middle
Eastern countries, restrained in part by US licensing
agreements, are being challenged by French and
British sales efforts. According to press
reports:
France is rapidly consolidating a close military
assistance relationship with Iraq, Italy's biggest
customer, based on sales of Mirage F-1 fighter
aircraft and tactical missiles, and on Iraqi coproduc-
tion of the Franco-German Alphajet.
Britain is vying for the Iraqi and Egyptian markets
by offering Baghdad spare parts for captured
Iranian Chieftain tanks and supplying coproduction
agreements for tactical missiles to Cairo.
Britain and France are both competing for Saudi
orders for armored vehicles and electronic equip-
ment, which Italian manufacturers would like to fill.
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We believe Italy's inability to offer advanced fighter
aircraft comparable with those being marketed by its
competitors will continue to limit Italian sales pros-
pects among the larger Third World purchasers. The
AMX fighter, which will not even become available
for several years, pales in comparison with the F-16
and Mirage 2000 aircraft, and in our opinion Italian
estimates of a 600-plane market for the AMX are
likely to be overly optimistic. At best, the AMX may
supplement the capabilities of high-performance
fighters in the larger air forces of the Middle East.
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Italy's lack of a centralized procurement and market-
ing organization will also hamper sales. Such organi-
zations in the United Kingdom and France channel
research and development funds to promising weapons
designs and then enlist the efforts of government-
supported marketing consortia. The Defense Techni-
cal Center in the Italian Ministry of Defense performs
only a minor role in the design and development of
weapons systems; it lacks broad authority over the
nation's defense industries. 25X1
Italy's proposed industrial development plan would25X1
restrict plant modernization and expansion by at-
tempting to stimulate capital investment and econom-
ic development in the poorer, southern half of the
country. EFIM, for example, plans to target 60
percent of its investment credits through this pro-
gram. According to press reports, companies that
have moved to the south have experienced production
lags, caused in part by shortages of skilled workers.F_
Finally, we expect global security and economic 25X1
trends to limit Italian arms sales over the next few
years. Sales rose in the mid-1970s when oil-wealthy
states increased their arsenals and diversified their
purchases to nontraditional suppliers like Italy. Many
of these countries now face increased security threats
and, are looking for
implicit security commitments to accompany their
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arms purchases. Italy's nonpower status is likely to be
less of a competitive factor than in the past. At the
same time, many of Italy's traditional customers are
facing foreign exchange shortages and are likely to
give cost greater weight in their choice of weapons
systems. many LDCs
have been attracted to Italy's medium-performance
equipment because of its lower price and high quality
compared with that of smaller suppliers. Italy's high
inflation rate, relative to other suppliers, may increase
the cost of Italian weapons. If prices rise, this equip-
ment will become less competitive both with more
advanced weapons systems and with lower technology
systems produced by smaller European and Third
World suppliers.
To maintain its present market share, we believe Italy
will:
Continue to rely on sales to radical Arab states.
Press sources indicate that Italy has
been reassessing its arms-supply relationship with
Libya for more than a year, but we anticipate that
new contracts for trainer aircraft, electronics, and
missile systems will be signed once Tripoli's finan-
cial situation improves. Diplomatic reports indicate
that Italy is willing to conclude major arms agree-
ments with Iraq after the war with Iran ends. We
believe Rome is also willing to consider similar sales
to Iran.
Continue to offer a unique collection of medium-
performance weapons such as the G-222 AWACS,
A-129 attack helicopter, and OF-40 tank. Competi-
tors lack comparable weapons systems in the same
price range for exam-
ple, that Nigeria and Peru will soon purchase the
MB 339 jet trainer.
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Take advantage of disruptions in existing supplier-
recipient relationships. Italy should be able to pick
up some sales in Latin America at the expense of
the United Kingdom and France because of Rome's
resistance to economic sanctions on Argentina by
the European Community. Italian press accounts of
the Falklands conflict are already highlighting the 25X1
presence of Italian-made warplanes in the Argen-
tine Air Force.
wan. Taiwan
is interested in purchasing 50 turboprop trainer
aircraft and 30 helicopters from Italy.
Italy is simultaneously exploring
sales to China. We believe Italy will have to choose
between the two in the long run, probably on the
basis of immediate economic gain.
Continue its close association with NATO partners
in the codevelopment of new weapons systems. This
will guarantee Italian manufacturers access to the
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newest technology, which they can then incorporate
into purely Italian weapons systems, as they have
done in the past.
Rome will continue to insist on increased US pur-
chases of Italian weapons systems. Italian officials
point out in bilateral discussions that Washington has
failed to implement the 1980 Memorandum of Under-
standing, which was designed to increase such pur-
chases. The recent cancellation of the US Army's
9-mm handgun procurement program, in which an
Italian entry was a leading candidate, drew a sharply
negative response from Rome. We believe the size of
Italy's defense budget and the pace of its moderniza-
tion programs-items that Washington has used as
indicators of alliance resolve and unity-could
become increasingly tied to US purchases of Italian
weapons systems. 25X1
Implications for the United States
We believe that Italy's continued reliance on sales to
radical Arab states will periodically lead Rome to
approve arms transfers that are inimical to US inter-
ests. Italian sales to Libya, for example, have assisted
Tripoli in circumventing US attempts to isolate Qad-
hafi's regime. Italian and other West European arms
only slightly improve Libya's Soviet-based arsenal,
but they are valuable political symbols of nonalign-
ment as well as an opening for wider economic
relationships. Italian sales to Iran have served a
similar purpose for Tehran
To preserve their relationships with these states,
Italian manufacturers are likely to continue to replace
US components in their weapons systems when they
feel Washington might restrict sales. This process of
substitution, combined with the growing involvement
of Italian defense contractors in European codevelop-
ment and coproduction projects, will reduce Italian
dependence on US technology. Individual Italian
manufacturers will, however, maintain close ties with
25X1 their US counterparts when profitable.
Washington can also expect additional Italian re-
quests for US cooperation in arms sales to the Third
World and NATO's southern flank. These will typi-
cally involve FMS financing of Italian arms sales and
approval for the transfer of US weapons systems.
Such requests will often be detrimental to US eco-
nomic interests when they involve a reduction in
direct purchases of US equipment. They may also
.complicate US security and political relationships
when the introduction of this equipment upsets re-
gional balances of power and complicates the logistics
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systems of recipient nations
an Italian transfer of obsolete
M-47 tanks to Somalia threatens to overload the
Somali Army with equipment that it will have serious
difficulty in maintainin .
We believe these problems are manageable and will
not threaten Italy's reliability as an ally.
25X1
Should regimes change in Ethio-
pia, Iran, or Libya, Italy would also be in a good
position to create the basis for Western influence in
those nations.
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Secret
Appendix A
Table A-I
Sales of Major Arms Exporting Nations
USSR
France
8,797
1,263
Table A-2
Italy's Leading Arms Sales Customers
268
331
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Table A-3
Foreign Military Trainees in Italy
Table A-4
Italian Military Technicians Abroad
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Secret
Appendix B
Ownership of the Italian Arms Industry
Indicates either total or partial ownership
Holding companies
Subsidiary holding companies
A=Aircraft
E=Electronics
G=Ground forces vehicles
I =Infantry equipment
M=Missiles
N=Naval equipment
O=Ordnance
Ministry for State
Participation
Finanziaria E. Breda, SpA
j Finmare
Finanziaria Telefonica,
SPA
Construzioni Aeronautiche G.
Breda Fucine (G)
Cantieri Navale Breda (N)
Elettronica San Georgio,
Agusta (A)
Breda Meccanica
Cantieri Navale
SPA (E)
Elicotteri Medidionali (A)
Bresicana (0, N)
Muggiano (N)
Industrie Elettroniche
Fonderie e Officine
Oto Melara (N, M, G)
Cantieri Navale Riuniti (N)
Associate, SPA (E)
Meccaniche di Bevento (A)
Simmel (0)
Grandi Motori Trieste (N)
Vitroselenia (E)
Industria Aeronautica
ITALTEL (E, A)
Meridionale (A, M)
SIT Siemens (E, M)
Siai Marchetti (A)
{ Finmeccanica
I
I
I
Appliczioni Industriali Fiat
Dinamiti (0)
Aeritalia (A)
Benelli, SpA (I)
OM (G)
SNIA VISCOSA (0)
Aermacchi (A)
Cantieri Posilippo, SpA (N)
Elettronica per I'Automazione,
Alfa Romeo, SpA (A)
Ducati, SpA (E)
Soc. di, SpA (N)
Ansaldo Soc. Generale
Nuovi Cantieri Apuania,
Fiat Aviazioni (A)
Elettromeccanica (N)
SpA (N)
Fiat Veicoli Industriali,
Industriale Aerospaziale
Nuovi Cantieri Liguri,
SpA (G)
Meridionali (A, M)
SPA (N)
Generale Missilistica
Stabilimenti Meccanici,
Officine Aeronavali Venezia,
Italiana (M)
SpA (G)
SpA (A)
Gilardini, SpA (E, 0, 1)
Termomeccanica Italiana,
OMI, SpA (A)
Grandi Motori Trieste,
SPA (N)
SpA (N)
Sistemi Elettronici, SpA (M)
Turbo Union, LTD (A)
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