Foreign Relations of the United States, 1958–1960, Western Europe, Volume VII, Part 2

229. Report by the Operations Coordinating Board⁰

December 10, 1958.

OPERATIONS COORDINATING BOARD REPORT ON ITALY (NSC 5411/2)¹

(Policy Approved by the President on April 15, 1954)

(Period Covered: From April 30, 1958 Through December 10, 1958)

A. Summary Evaluation

1. After elections in May, 1958, the domestic political situation appeared improved. A weak caretaker government was replaced by a Christian Democrat-dominated Center Government which has evinced the desire to work closely with us and which we have supported. Prime Minister Fanfani displayed initial vigor in preparation of an ambitious domestic program and in foreign policy. His parliamentary situation, however, is precarious, because he does not have a majority and because he is strongly opposed by certain members of his own party.

2. Because of firm obstruction on the part of the Government, the Communists have as yet been unable to put their propaganda machine into high gear again following the elections, i.e., in protesting U.S. action in Lebanon. Communist electoral strength has, however, remained constant despite a slight advance by the Christian Democrats and a surprising increase on the part of the Nenni Socialists.

3. Italian foreign policy under Prime Minister Fanfani has continued to be based on strong cooperation within the Western Alliance, featuring close identity with U.S. policy, active support of NATO, and continued interest in European integration. The Italian Government stood firmly against Soviet pressures and representations, notably in Italy’s facilitation of U.S. military movements to Lebanon and the firm rejection of a Soviet protest in this regard. Italian efforts to achieve greater international importance and prestige continued but greater emphasis was laid on contribution rather than solely on consultation on policy, particularly in gestures to establish Italy as a moderating influence in the Near East.

4. Italian economic expansion continued satisfactorily although the rate has declined somewhat. Italy’s external economic position continued to strengthen with gold and dollar reserves standing at $1.8 billion as of August, 1958.

5. On balance, there was some progress toward U.S. objectives in Italy during the period under review.

6. Review of policy is not recommended.

B. Major Operating Problems or Difficulties Facing the United States

7. Orientation of the Government

a. Background.

1. U.S. interest in [less than 1 line of source text not declassified] a Center government was successfully met by the election which resulted in a slightly left of Center coalition government of Christian Democrats and Social Democrats under Fanfani. The government lacks a majority and governs on the basis of the benevolent abstention of the Republicans. From our point of view the increased electoral support for the Christian Democrats and the melting down of Monarchist Right-wing political groups are favorable developments. Continued Communist strength, measurably increased Nenni Socialist strength and dissension within the Christian Democratic party are undesirable. This last feature has come out into the open in connection with minor legislation in Parliament, where the government has twice recently been defeated in secret ballots. The DC dissidents, centered around party notables, primarily of the right wing, [less than 1 line of source text not declassified] have seized upon an atmosphere troubled by a DC regional crisis in Sicily and the press clamor over the personnel changes in the Foreign Office, to consolidate their personal opposition of Fanfani. The latter, however, was able to command party discipline in a confidence vote won by a slim majority on December 6.

2. Gronchi, since he assumed the Presidency of the Italian Republic, has sought to broaden the powers of his office by taking action along lines where the Constitution is obscure or there is no clear precedent. Because of his espousal of a more neutral and unilateral Italian policy within the Western Alliance and in the Middle East, Gronchi has proved to be an irritant with regard to certain U.S. foreign policy objectives. Gronchi’s affinity for the Left, in particular the Nenni Socialists, represents a possible danger to the control of the domestic political situation by the Center. However, his activity during the early period of the Fanfani administration has been reduced in comparison with the period covered by the previous report. He appears at present to be giving his support to Fanfani’s efforts to develop an effective program. His support is politically useful to Fanfani since it is necessarily through the President’s agreement that Fanfani could use the threat of new elections (which would probably accelerate the trend toward the Left) to hold his dissident Right Wingers in line.

3. The stand recently taken by Nenni in support of the “autonomist” wing of the Socialists (which desires to eliminate the strong Communist influence over the party) threatens a possible split of the party at its forthcoming January Congress. Nenni’s ability to win complete control of the party from the pro-Communist element is open to question. If he is not able to do so, the Congress could result either in a compromise by Nenni to preserve the unity of the party, or, in the event of Nenni’s defeat, in a splitting off of the Autonomists. The influence which any change in the present makeup of the Socialist party will have on the delicately balanced Italian political situation will be determined by the outcome of the Socialist Congress in January, 1959.

b. Status of U.S. Action on Orientation of the Government. Our support contributed to [less than 1 line of source text not declassified] the formation of a middle-of-the-road government. Its foreign policy has so far been strongly pro-U.S. and pro-West. We are continuing to support the government by all appropriate means at our disposal, including frequent consultation on major matters of common concern.

8. Communism

a. Background. The Communist Party remains a major problem. Notwithstanding disturbances behind the Iron Curtain, defections from the Party ranks, generally improved economic conditions in Italy, and U.S. programs, the Communist Party of Italy (PCI) retained its strength in the national elections of May, 1958. On the other hand, while many basic problems in Italy upon which Communism feeds remain unsolved, the election results give certain indications of weakness in the Communist position. The PCI lost votes within its traditional strongholds in urban and northern areas largely to the Nenni Socialists (PSI), and made these up with gains in voters of questionable fidelity from the politically less mature South. A tentative analysis of the voting indicates that the PCI did not have the appeal to the new young vote which it demonstrated in the past. One aspect of the election campaign was the elimination of a large number of former PCI parliamentarians by the party leadership with a view toward increasing party discipline and efficiency while meting out punishment to revisionist elements in the party. Recurring rumors indicate the possibility of displacement of the ailing Togliatti by Luigi Longo of the PCI Secretariat.

b. Status of U.S. Action on Communism.

1. Current U.S. programs in Italy, which are all designed to combat Communism directly or indirectly, include: economic assistance under PL 480; Export-Import Bank loans; Bilateral Technical Assistance; Fulbright Program; Atomic Energy Bilateral Program; assistance to Yugoslav refugees in Italy; Mutual Defense Assistance Program; Mutual Weapons Development Program; information program; labor exchange program; policy of refusing U.S. Government contracts and loans to firms whose labor supports Communist-dominated unions. Moreover, U.S. military units stationed in Italy exert a beneficial influence, as evidenced by a decrease in Communist votes and Communist domination of labor in areas of troop concentrations, and in the generally excellent troop-population relations which prevail in Italy. We continue to support the Center parties committed to democratic, middle-of-the-road solutions, and to encourage the Italian Government to act itself against the Communists.

[2 lines of source text not declassified] In the last analysis it is a problem which the Italians must deal with themselves as they attain more widespread political consciousness and more adequate standards of living for the under-privileged groups. It is believed that it is very important for Italians to maintain movement toward these goals and that an increasing sense of personal and national fulfillment under democratic institutions will provide the best counterpoise to the Communist attraction.

9. Italy’s Oil Aspirations and the Role of Enrico Mattei

a. Background.

1. The Italian Government continues to urge consultation between our two governments to remove existing “frictions” between the Italian State Petroleum Agency (ENI), which is controlled by Enrico Mattei, and the major U.S. international oil companies.

2. The United States is concerned by Mattei because of his influence on certain aspects of Italian foreign policy. His operations, both inside and outside Italy, have tended to foster nationalistic ideas and unilateral action by Italy in the Middle East, North Africa and Latin America. These operations are now one of the points of departure for Italy’s claims of “special interest” and “special competence” in that area. Financial or other difficulties arising from these actions will inevitably involve the Government of Italy.

3. Mattei has achieved a position of strong political influence in Italy from his control of a number of deputies, influence on the press, access to government funds through ENI, a close personal relationship with President Gronchi and considerable public support. It is doubtful whether at this stage, any organ of the Italian Government could exercise effective control over Mattei’s activities, either domestic or foreign.

4. The “friction” with U.S. companies has been a result of Mattei’s political power in Italy. His political influence led to the exclusion of U.S. and other foreign companies from participation in oil exploration and development on the Italian mainland. Similarly his government supported foreign operations have threatened long-standing relationships between certain governments and foreign companies. Should relationships between U.S. companies and foreign governments deteriorate as a result of these operations, it would be virtually impossible to avoid the involvement of the U.S. Government in consequent disputes.

5. The approaches of the Italian Government have consisted of requests for U.S. Government intervention with U.S. companies to admit ENI to partnership in their foreign operations. Failure to do so, in the eyes of the Government of Italy, would result in continued unilateral action by Mattei to the detriment of Italian-American relations. Also, it is apparent that as a means of enhancing its economic and political importance, Italy would be interested in increasing its participation in the international oil field.

b. Status of U.S. Action on Italy’s Oil Aspirations and the Role of Mattei.²

1. The United States has advised the Italians that we do not intervene in normal commercial operations of private American companies and has indicated that problems between Mattei and the U.S. companies should be amenable to direct commercial settlement.

2. However, we must bear in mind that the Italian Government, either through a man such as Mattei or otherwise, will continue to bring pressure and take steps to acquire some participation in the oil resources of the Mediterranean area and the Middle East in order to meet its pressing requirements, which now constitute a net burden on the trade balance of approximately $285 million a year. It will continue to consider that its economic requirements and its position in the Mediterranean justify it in taking such action.

3. In view of the foregoing, it would seem desirable to explore the situation with a view to determining whether it might be in the interest of the U.S. to seek a degree of accommodation with the Italian desire for an assured supply of petroleum, taking into account the possible effects of any such action on the internal Italian political situation and Italian foreign policy. In exploring the situation, however, we should be mindful of the strength of the Italian Communist Party, which uses economic arguments to promote its own ends, and of the fact that Italy’s oil operations provide the Communists with a naturally popular program.

10. Civil Aviation

a. Background. The Italian Government considers the U.S.-Italian 1948 Civil Aviation Bilateral imbalanced in favor of the United States, in that the broad terms of the Route Annex allow U.S. carriers to operate to and through Italy with few restrictions while the Italian carrier is severely limited as to traffic points in the United States.

b. Status of U.S. Action on Civil Aviation. The United States has recently entered upon formal consultations with the Italian Government regarding the Italian desire for an amended Route Annex and other civil aviation problems. It is anticipated that the United States will be in a position to offer certain concessions to the Italians in order to arrive at a mutually satisfactory agreement.

Note: See latest National Intelligence Estimate, NIE 24–58, dated November 4, 1958, entitled “The Political Outlook in Italy”.³

0. Source: Department of State, OCB Files: Lot 61 D 385, Italy 1958–60. Secret. Annex A entitled “Additional Major Developments,” a Financial Annex, a Pipeline Analysis, and Annex B entitled “Uncoordinated and Informal Background Paper Submitted by CIA Entitled ‘Sino-Soviet Bloc Activities in Italy’ dated December 8, 1958,” are not printed. In a memorandum dated January 15, attached to the source text, Bromley Smith, Executive Officer of the OCB, stated that this document was concurred in by the Board on December 10. Minutes of the December 10 meeting are ibid.: Lot 62 D 430.
1. Foreign Relations, 1952–1954, vol. VI, Part 2, pp. 1677–1681. For the OCB report covering the period September 4, 1957 to April 30, 1958, see Document 209.
2. In a memorandum dated January 13, attached to the source text, Roy Melbourne of the OCB staff submitted alternate State-CIA and Treasury proposals for the revision of this paragraph for consideration at the January 14 meeting of the Board. Although the item was on the agenda of the January 14 meeting, the OCB minutes of that and subsequent dates indicate the matter was not taken up. The minutes of the January 14 meeting are in Department of State, OCB Files: Lot 62 D 430. Other documentation relating to the alternate proposals is ibid., OCB Luncheon Items.
3. See Document 227.