Berlusconi and Putin pledge intensified economic ties, focusing on energy, airlines

Italy's Premier-elect Silvio Berlusconi and Russian President Vladmir Putin said Friday they want to intensify energy cooperation and raised the possibility Aeroflot could get involved in saving Italy's struggling Alitalia airline.

The two leaders, who met at Berlusconi's Sardinian villa just days after Berlusconi won elections securing his return to office, said they want to broaden the cooperation between Italy's Eni energy company and Russia's gas monopoly Gazprom.

Putin said he hopes Gazprom will have a role in Libya with Eni, without providing details. Putin made the overnight stopover in Sardinia on his way back from Libya, where he met with Libyan leader Moammar Gadhafi.

Eni's chief executive Paolo Scaroni on Thursday said that Eni's Elephant oil field in Libya is among the assets being offered as part of a 2006 accord signed by Eni and Gazprom cementing their ties. Such a deal would require Gadhafi's approval.

Under the deal, Eni was allowed to enter Russia's to invest in the oil and gas sector in Russia while Gazprom was free to sell gas directly to Italy. The companies also agreed to swap assets.

Putin also said Aeroflot was ready to reopen talks with Alitalia, although exactly what the Russian carriers role could be remained unclear. Aeroflot was among the bidders who walked away from a failed auction last year, and its general director was quoted by Russian television on Thursday as saying it was not interested.

"I talked to Aeroflot's board chairman today," Putin told reporters. "He is ready to resume contacts with the Italian partner."

Berlusconi's intentions regarding Alitalia aren't entirely clear.

During his election campaign he pledged to rally Italian investors to save the failing airline from bankruptcy, in opposition to a takeover by Air France-KLM. But in the last couple of days he has softened his resistance to an Air France-KLM takeover, saying it was important that Alitalia be equal with the other carriers and that it have Italian management _ a position he repeated on Friday.

He also said Alitalia's future remained "very open" and that contacts with Air France-KLM about a potential sale were continuing. On Thursday he said he would discuss a tie-up with French President Nicolas Sarkozy after taking office.

Air France walked away from exclusive talks over union demands earlier this month, and the process has been up in the air during the election period. Berlusconi's government is expected to take office in early May.

Alitalia, meanwhile, is teetering on the brink of bankruptcy. It has been losing euro1 million (US$1.6 million) a day and is expected to run out of cash by June.

Berlusconi dodged a question about whether the Italian government was planning a bridge loan _ a possibility that circulated in the Italian media after a meeting Thursday between a key Berlusconi aide and an official in Premier Romano Prodi's outgoing government working on the Alitalia deal.

"The problem is so big that everything else doesn't matter, (including) bridge loans. ... What matters is solving the problem and keeping Alitalia as a flagship carrier to bring foreign tourists to Italy," Berlusconi said.

The European Commission said Friday that whatever the future holds for Alitalia _ a linkup with Russia' Aeroflot or the Air France-KLM giant _ the Italian air carrier cannot count on subsidies from the Italian government until at least 2011.

Alitalia won an infusion of state aid in 2001, and under EU competition rules that means it is excluded from another no-strings-attached cash injection for at least 10 years.

Alitalia received euro400 million in 2005 as a "bridging loan" which the company has reimbursed, said EU spokesman Michele Cercone.

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Associated Press Writer Robert Wielaard contributed to this report from Brussels.

(cb/ar)