State Within a State

When rumors spread throughout the oil world from Baghdad to Manhattan last week that Iraq, out of pique at Britain, was planning to nationalize its oil industry, worried oilmen instinctively turned their eyes to Rome, as Iraq's likeliest collaborator. There, in a modest Rome office, sits lean and nervous Enrico Mattei, 55, the chief of Italy's state-owned oil and gas monopoly, called E.N.I, (for Ente Nazionale Idrocarburi). By shrewdly bargaining with any government that wants to deal in oil, Mattei has made E.N.I, so powerful that Italians dub it "the state within the state."

Though Iraq heatedly denied that it had approached Mattei to supply 500 technicians or that Baghdad even considered nationalizing the giant Iraq Petroleum Co.,* a Mattei aide confirmed that the Iraqis have been dickering with E.N.I, as long as a month ago.

"That Is Excessive." Power-thirsty Enrico Mattei is driven by his longstanding price fight with the West's big private oil companies (which he mockingly calls "the seven sisters"). "Prices are formed in the Middle East," says Mattei. "The big companies spend 15-20% of their take on production, exploration, research--everything. They pay 40% royalties to the sheiks, and they take 40% profit. That is excessive."

Taking smaller profits himself, Mattei is giving his rivals trouble in Asia, Africa and Europe. In Iran he undercut private companies by offering the government 75% of the profits instead of the usual fifty-fifty on any oil he found. In India this year, he made so tempting an offer that the U.S.'s Stanvac, a subsidiary of Standard Oil (N.J.), withdrew from the bidding.

But Mattei has yet to make a major oil find himself, although E.N.I, has spent millions exploring in nine lands. Instead, searching for cheap oil to market in Europe, he has found a cut-rate supplier that does not share its profits with sheiks or stockholders--Russia. Enrico Mattei is the biggest European buyer and distributor of Russian oil, selling it to countries which, though they limit their own direct importation of Soviet oil, feel no compunction about buying it through Italy.

To streamline E.N.I.'s petroleum distribution system, Mattei is building a pipeline from Genoa to Switzerland and on beyond into West Germany. He also plans a line from Venice to Wiener Neustadt in Austria, only 40 miles from the terminus of a projected Soviet line. Rumors--which Mattei neither confirms nor denies --have it that he plans to link his system directly to the Soviets'.

"Not Bad, Eh?" As a supporter of Italy's governing Christian Democrats, Mattei might be expected to be leery of a Moscow partnership, but he justifies it on simple economic grounds. "In the past eleven months," says he, "we have spent $100 million for Soviet petroleum. If we had bought the same quantity of oil from Western companies, it would have cost $140 million."

Mattei's growing political influence has even his own Christian Democrats worried. Though they criticize his iron rule of E.N.I., they dare not curb it since the government depends heavily on E.N.I. profits, which amounted to $7.4 million on sales of $577 million for its past fiscal year. Furthermore, Mattei ranks as a national hero for his much-headlined battles against the oil Goliaths, and for reducing Italian gasoline prices by 22% in the past two years. He has built E.N.I., once a discredited Fascist enterprise, into one of Europe's biggest industrial complexes--one which turns out a range of goods from soap and kitchen equipment to heavy machinery and oil rigs, employs 21,500 workers and has a fleet of 15 tankers.

Last week Enrico Mattei proudly listed his accomplishments: "We're building seven refineries in Morocco, Tunisia, Ghana, Poland, Sicily, the Po Valley and Switzerland. We're building our own offshore drilling rigs. One is already in the Red Sea, two in the Persian Gulf, one will start soon in a gas field in the Adriatic. Just yesterday I returned from Rumania, where I sold $5,000,000 worth of equipment. Not bad, eh?"

As for Iraq, Mattei is more than ready to take on the Western oil majors there, or anywhere else. "Now we have experience," says he. "Now we have our staff of thousands of engineers, geologists, chemists and other specialists. Now I'm in the same situation as the big oil companies." And he adds: "I'm not afraid."

*Controlled by five western oil companies: British Petroleum (23.75%), Royal Dutch Shell (23.75%), France's C.F.P. (23.75%), Standard Oil of New Jersey (11.875%) and Socony Mobil (11.875%).

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