An appeal to realism for defense exports. This was pronounced yesterday in the Defense Commission in the Chamber by Fabio Sgarzi , CEO of RWM Italia, the company owned by the German group Rheinmetall often at the center of the debate in recent years on military sales. With two factories in Sardinia (Domusnovas and Ghedi) he makes bomb bodies, missiles and other systems that he sells all over the world. Since 2019 it has been hit by the stop on exports decided by Italy to the Arab Emirates and Saudi Arabia for their involvement in the war in Yemen. The company has lost turnover and employees, currently 340. Italy has collected the complication of relations with two countries, evident in the case of the eviction from the Emirate base of Al Minhad. GROWTH
“In almost eleven years of existence, thanks to the constant financial commitment of the group and success in the international market, the company has seen its turnover grow from 21 million euros in 2011 to over 140 in 2020”, explained Sgarzi. “The group’s strategy has been to support growth in Italy by reinvesting profits in new technologies and plants: investments to date have accumulated over 70 million euros in less than ten years”. The result is on the combat aircraft supplied to the Western Armed Forces, from Eurofighter to Gripe, from Rafale to Mirage, up to American aircraft: F-15, F-16 and F-35. THE TURNOVER
On the other hand, the group’s business is based on exports, “as for most of the defense companies”, noted Sgarzi. “In 2020, the turnover towards the Italian Ministry of Defense was less than one million euros, only 0.7% of the total; the total of direct and indirect orders, also through connected companies, such as Leonardo, with the defense administration, today amounts to about three million, which represents 1% of the total order portfolio at home, excluding the 325 millions associated with contracts whose licenses have been revoked “. But the sector, in addition to being strategic for national defense, also appears extremely competitive: “to stay at the top, funded research and development projects are needed,” noted the manager. We therefore need “continuity”,TO WHOM RWM ITALIA SELLS
In the aircraft bomb market “our recurring customers are end users, where the quality and safety of the product prevails over the price; our normal users are France, the United Kingdom, Germany, Poland, Sweden, Australia, Thailand, Brazil; we range from Europe to the rest of the world, as well as obviously the Arab countries ”. More: “We regularly clash in this fierce world against US, Brazilian, Spanish, French, Israeli companies.” It must be said, Sgarzi remarked, “that in this context the revocation of the licenses of January 2021 towards Saudi Arabia and the United Arab Emirates has heavily damaged the credibility of the company especially in these markets, which are the most interesting, Middle Eastern ones”. THE ITALIAN ANOMALY
Everything stems from an anomaly. “Typically”, explained the manager, whoever buys new military aircraft also acquires a package of bomb bodies and ensures future supplies. This is not always the case for Italian exports. “To favor the sales of platforms – explained Sgarzi – they are presented as neutral objects”, so as to avoid that “the political debate, always legitimate”, can complicate the export. But there is a limit: “no one buys a weapon without knowing from whom and how to buy ammunition”. This is why the stop to aircraft bombs and missiles decided by Italy towards Saudi Arabia and the Emirates in 2019 has had an impact not only on RWM, but also “credibility of the country-system”. RESPECT FOR THE PERIMETER
“The suspension in 2019, and the subsequent revocation in January 2021 of the export licenses for aircraft bombs to Saudi Arabia and the United Arab Emirates have interrupted the execution of multi-year contracts; it was the state that made continuity disappear as a necessary element for all companies in the defense sector ”, explained Sgarzi. “There are those who wanted to reduce the problem to business risk, almost as if the contracts acquired were the result of risky choices, when instead RWM Italia obviously moved within a restricted perimeter, as defined and authorized by the State, and at a certain point, after almost five years of evolution of the contract “. The company managed to “soften the blow” thanks to “internal reorganization and intergroup brokerage contracts”, but these are “time-based solutions”. In fact, “we have accelerated the process of diversification within our competences, we have multiplied our commercial efforts, but I assure you that the loss of credibility on the international market caused by the revocation of the licenses weakens us a lot”, Sgarzi told the deputies of the Commission. Defence. In this context, he added “I believe that the State can, indeed must, do more”.L’END USER BASTA
The first signal arrived at the beginning of July. Uama (the Farnesina office responsible for military exports) has revoked the “strengthened end user” clause for exports to Saudi Arabia and the United Arab Emirates, ie the request to buyers to guarantee that Italian products and services are not used in the war in Yemen. But “the strengthened end user was not an impediment to exports,” Sgarzi said. Among other things, its revocation does not remove the stop to aircraft bombs and missiles. “This has generated confusion for the Emirates and Saudi Arabia, because their expectations were that it could be a first step to quickly bring about the normalization of the situation,” noted Sgarzi. “Neither country understands why everything except some products can be exported, given that, according to their point of view,THE SITUATION
The impression is that Uama’s move is too timid a signal to resolve the crisis in relations with the Emirates (and to prevent the same from happening with Saudi Arabia). “The Defense looks carefully at the diplomatic actions in progress for the resumption of dialogue and the recomposition of positive positive relations with what remains an important partner for our country”, recently explained Minister of Defense, Lorenzo Guerini , in the question time in the Senate. In the Chamber for the resolution of missions, his colleague Luigi Di Maiohe had previously explained: “We have a parliamentary resolution committing by law our officials to carry out this blockade; until Parliament decides the opposite with a similar act, we will not be able to change this regime ”. This explanation is unlikely to be enough in Abu Dhabi and Riyadh. THE REALISM THAT IS MISSING
Finally, there is the realistic reading of the theme. If the stop to sales is only Italian, the effects produced are three: the loss of credibility of our country, the commercial damage to national companies and the tightening of relations with the recipient states (evident in the UAE case). No possibility of orienting the choices of those countries, which can easily direct the demand for armaments to other sources (perhaps our competitors) or choose to produce them themselves, depriving themselves of the relationship of dependence on Italy in both cases. Meanwhile, the effect is evident on RWM Italia and on the employees of the Domusnovas site. In 2019, 330 people worked there. If there hadn’t been a stop, today they should have been almost double. Instead they are “about 200”, at least for the next five or six months.
Sgarzi’s hearing came on the day Guerini issued the first directive for industrial defense policy. It contains numerous references to military export and how to improve public support. “The international dimension of the industrial defense policy”, reads the document, is “a factor in the national economy and in the country’s foreign, cooperation and security policy and an instrument for pursuing and protecting national interests”.
