Libya: From "mad dog of the Middle East" to foreign oil/investment bonanza
Lucrative dance with West and world many years in making 
By Larry Chin
Online Journal Associate Editor

December 23, 2003 - Last Friday, according to news reports, Libya and Colonel Muammar Qaddafi "pledged to reject terror," agreed to "disclose and dismantle long-range missiles and weapons of mass destruction programs in exchange for Libya's status as an international pariah," and open itself up to international inspections, in the hopes for full restoration of US-Libyan relations after two decades. Lurking in the billowing Bush administration "world supercop" propaganda smoke, the true strategic agenda driving Qaddafi's actions has been unfolding for years.

Although the Libyan announcement was another well-timed propaganda coup benefiting the struggling Bush and Blair administrations, it was neither a shocking nor sudden "historic change" caused by the alleged capture of Saddam Hussein.

It was, in actuality, the culmination of many years of open Libyan courting of foreign investment and rapprochement with the US and Britain, inspired not so much by outside political pressure, but by (1) increasingly ambitious Libyan economic aspirations, (2) deliberate and public disputes with Middle Eastern nations (see "Gaddafi Announces Separation from the Arabs"), and (3) an older Qaddafi, who for a variety of reasons, is comfortable with the idea of a relationship with the United States - even after more than 30 years of US pressure and assassination attempts (the most significant of which was the Reagan administration air strike in 1986 that murdered his 1½ year old daughter and severely wounded other members of his family).

As is the case with all major world events today, it is critical to view recent events against the backdrop of Peak Oil (the battle among nations and elite coalitions to secure and control all remaining world energy reserves, under the pretext of the "war on terrorism"), and other "globalization" imperatives.

As noted by Franz Schurmann in "'Rogue' No More? US Eyes Oil in Libya, Sudan" (Pacific News, June 18, 2002), "oil isn't getting any more plentiful in the world, Libya is sitting on a lot of what's left," and the Bush administration could not afford to be left out: 

"The Bush administration is looking for oil in former 'rogue' nations Libya and Sudan. The reason for this policy shift is that most of the world's major oil regions - the Middle East, Central Asia and the Andean nations - are now riddled by violent conflicts.

Libyan oil production already ranks second to Nigeria, and the Sudan, when fully explored by oil geologists, could eventually rival oil behemoth Saudi Arabia . . . the African continent has 7 percent of the world's oil and natural gas reserves, with five countries (Nigeria, Libya, Algeria, Egypt and Angola) leading production, while Chad and Sudan are coveted for exploration.

American oil companies are clearly envisaging an African substitute for their lost Central Asia. That region would begin in the Persian Gulf and extend through a vast African expanse, deep into Nigeria."

Adding further urgency to the Bush administration's predatory goals in Libya are continuing crises in Iraq and the Middle East, still-undeliverable Iraqi oil, and tragically disappointing Central Asian energy yields.

US Races to Join Unfolding Libyan "Great Game"

According to the US Department of Energy's Energy Information Administration analysis of Libya (July 2003), it is rich in oil and gas, ripe for exploration and development. It has been actively courting foreign oil companies for close to a decade. Libya depends on oil for 95 percent of its hard currency earnings and 75 percent of government receipts. It is considered a highly attractive oil province due to its low cost of oil recovery, its proximity to European markets, and its well-developed infrastructure. In order to meet its own oil sector goals, Libya estimated that it would require as much as $10 billion in foreign investment through 2010. 

Currently, Libya has 12 oil fields with reserves of 1 billion barrels or more each, and two others with reserves of 500 million to 1 billion barrels. Despite years of oil production, Libya retains large untapped oil and gas potential, with only 25 percent of Libya's area covered by agreements with oil companies. Libya produces high quality, low sulfur ("sweet") crude oil at very low cost. 

Libya's proven natural gas reserves are estimated at 46.4 Tcf, but the country's actual gas reserves are largely unexploited (and unexplored), and thought by Libyan experts to be considerably larger, possibly 50-70 Tcf.

Tracking developments over the past several years, European and Asian companies have landed and begun major energy projects in Libya, while the US and its companies have been forced to play catch up, primarily in the past year.

In March 1998, President Bill Clinton paid the first visit to sub-Saharan Africa by a US president in more than 20 years, heralding new geostrategic interests in Africa. However, the sanctions remained in place on Libya.

In 1999, as reported in Alexander's Gas & Oil Connections, Libya amended its 40-year old petroleum laws to attract new investment in its oil industry, and to halt a decline in oil output. UN sanctions had cost Libya billions of dollars of lost revenue, causing Libya difficulty in developing its oil industry. At the time, Libya was in talks on 14 separate contracts:

"US oil companies including Chevron, Conoco, Exxon, Marathon Oil, and Amerada Hess sent executives to the conference to hear investment opportunities. Conoco, Marathon Oil, Amerada Hess, Occidental Petroleum and other US companies were forced to leave Libya in 1986 by then-President Ronald Reagan and still are forbidden from working there. [Oil minister] El-Aswald said those assets are still held in trust, and the companies are welcome to resume operations on them, should the US sanctions be lifted. Currently, European oil companies such as Agip-Eni of Italy, Lasmo of Britain, Repsol of Spain, OMV of Austria, Ludin Oil of Sweden, and a group of five South Korean companies (led by Korea National Oil Corporation) are working on Libyan oil projects that produce about a third of the nation's oil."

According to the EIA, in December 1999, "US oil company executives from the Oasis Group (Conoco, Amerada Hess and Occidental) and Marathon traveled to Libya, with US government approval, to visit their old oil facilities in the country. The former head of Libya's state-run National Oil Corporation (NOC), Abdullah al-Badri, has stated that if the US companies return to Libya, they will return to the fields they used to operate in the country. However, in the first part of 2001, Libya contacted the US companies and indicated that, given its desire to develop their fields, Libya was considering transferring them to European companies. In September 2001, Libya stated that the US companies must either make use of their concessions within a year or risk losing them [italics my emphasis-LC]. In March 2002, in response to this warning, the US State Department said that it would permit Marathon Oil to hold discussions with Libyan officials while sanctions remain full in place. 

Also, according to the EIA, Libya signed an agreement with China in April 2002 giving Chinese companies a wider role in the Libyan oil sector. In August 2002, the China National Petroleum Company (CNPC) won a $230 million contract to build twin oil and natural gas pipelines linking the Wafa field in the south to Melitah, near Tripoli. The pipelines become operational in 2004.

A number of significant natural gas projects, including a $5 billion joint venture between the NOC and Italy's Eni, and a $1 billion contract awarded to the consortium that includes Japan's JGC, France's Sofregaz and Italy's Technimont, with first flows scheduled to begin in 2004 and 2005 [italics my emphasis-LC]. There is another proposal for a 900-mile pipeline from North Africa to southern Europe (Spain). 

Last November 30, Libya awarded a $102 million oil and gas exploration contract to a consortium of Spain's Repsol-YPF, Australia's Woodside Petroleum and Greek company. 

Libya Shakes the Hand of the World Market

Libya is pursuing a variety of "economic reforms," and a reduction in the state's direct role in the economy. In January 2002, Libya devalued the official exchange rate on its currency to increase the competitiveness of Libyan firms and help attract foreign investment into the country.

Last June, Qaddafi declared that "the country's public sector had failed and should be abolished," and called for privatization of the country's oil sector, as well as other areas of the economy. That same month, Libya's Parliament selected Shukri Muhammad Ghanim, a proponent of privatization, to be prime minister. 

The EIA's report states that "Libya is hoping to reduce its dependency on oil as the country's sole source of income and to increase investment in agriculture, tourism, fisheries, mining and natural gas. Libya's agricultural sector is a top governmental priority. Hopes are that the Great Man Made River (GMR), a five-year phase, $30 billion project to bring water from underground aquifers beneath the Sahara to the Mediterranean coast, will reduce the country's water shortage and its dependence on food imports."

Pan Am 103 Patsies and Deals

The primary sticking point in US-Libyan relations has been Pan Am Flight 103.

On April 5, 1999, more than 10 years after the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, that killed 270 people, Libya extradited two men suspected in the attack. In response, the United Nations suspended economic and other sanctions against Libya that had been in place since April 1992

In July 1999, the UN Security Council issued a statement that Libya "would need to do more (i.e., cooperate with court proceedings, pay compensation to families if the suspects are convicted) before sanctions were lifted permanently.

As William Blum wrote in the Winter 1999 issue of CovertAction Quarterly ("Pan Am 103 & The Charge Against Libya: Case Closed or More Disinformation?"): 

"In actuality, the evidence against the Libyans, Abdel Basset Ali al-Megrahi and Lamen Khalifa Fhimah, who worked for Libyan Arab Airlines at the Malta airport, is thin to the point of transparency. There is no forensic evidence to support the charge that they placed a suitcase containing the fatal bomb in an Air Malta plane in Malta, so it would eventually be transferred to Flight 103 in London. No witnesses, no fingerprints. Nothing to tie them to that particular brown Samsonite suitcase. No past history of terrorism. 

It is surprising that Qaddafi has agreed to subject the two Libyans to a Scottish judge and Scottish law, without a jury. 

At the same time, it is unlikely that any US or British official really believes that Libya played a significant role, if any. And for that reason, they probably do not actually want to see the trial of the two men take place. Not only would the paucity of their evidence be exposed for all the world to see, but they might be obliged to reveal information they'd rather not see the light of day, perhaps touching upon the role played by one or more US intelligence agencies [italics my emphasis-LC]."

Clearly, Libya decided to sacrifice the two men, and pay reparations, in the hopes of Anglo-American recognition, and greater long-term gain.

Following further lifting of UN sanctions in January 2001, driven primarily by Britain, in response to the Lockerbie trial, London resumed full diplomatic relations.

In May 2002, Libya offered $2.7 billion in compensation to families of Pan Am flight 103, with money to be released as UN and US sanctions are lifted.

Last September, the $2.7 billion was awarded, with UN Security Council approval. Although the payment "deeply embarrassed France, which accepted far less a few years ago for the midair attack on a French UTA airliner over the African nation of Niger," overcoming a threatened French block of the resolution, angered both the US and Britain, which had pushed vigorously for it. "Lifting of the UN sanctions clears the way for an initial $4 million to be paid to each Lockerbie family. The first payment would be followed by another $4 million if the United States eventually lifted its sanctions, and by $2 million more if Washington dropped Libya from its list of state sponsors of terrorism. If Washington does not take those steps within eight months, the victims' families would receive just $1 million more, bringing total payments to $5 million per victim. The remaining money would then revert to Libya."

Towards an African Union and the West and Away from the Arab World

As written by Scott Anderson in The Makeover (New York Times, January 19, 2003), Qaddafi has not only fully embraced the Bush administration and United States, he has distanced himself from the Arab World that he once militantly represented. 

Anderson wrote: "Libya is also attempting to position itself as a key economic intermediary between Europe and Africa . . . and has pushed for a new African Union." (also see "Gaddafi Announces Separation from the Arabs"). He has renounced "previous 'armed struggle' against Western imperialism. Rather than trying to destabilize his Arab neighbors, he wants to create a pan-African confederation modeled along the lines of the European Union. He has even done an about-face with regard to Israel. The man who once called for pushing the "Zionists" into the sea now advocates the forming of one nation where Jews and Palestinians would live together in peace.

Qaddafi joked that once Israelis and Palestinians form "Israetine" (a future state envisioned by Qaddafi), "they could join the Arab League. 'They can take our place,' he said with shrug and a soft chuckle, 'because we're leaving.'"

Tellingly, Anderson noted that "Qaddafi was among the first Arab leaders to denounce the September 11 attacks, and he lent tacit approval to the American-led invasion of Afghanistan. To the astonishment of other Arab leaders, he reportedly shared his intelligence files on Al Qaeda with the United States to aid in the hunt for its international operatives"[italics my emphasis-LC]

Mary-Jane Deeb, Arab specialist at the Library of Congress is quoted saying:

"Certainly the UN sanctions were a big factor . . . at the same time, world oil prices had dropped significantly, so he simply didn't have the kind of money to throw around like before . . . Also, Qaddafi has just gotten older. I think for a long time he has yearned to be seen as a kind of elder statesman in the region . . ."

Finally, Qaddafi himself is quoted as saying, "It is the era of globalization, and there are many new factors which are mapping out the world."

Following Qaddafi's Money

It is fascinating to note that even throughout his decades as a "pariah," Qaddafi has been a major world financial player and investor - and that some of his financial dealings cross paths with those of Osama bin Laden, the CIA, and Bush-Saudi Arabia-BCCI.

In an article from the Business Times titled Muammar Gaddafi: The Wise Investor, Qaddafi's financial wealth is significant, global in reach - and, apparently, deftly managed, right under the noses of US authorities, by Mohamed Ali El Huwej, a native of Tripoli with a management degree from Arthur D. Little Institute in Boston:

"Mohamed Ali El Huwej, Gaddafi's money manager, last September told the US's Bloomberg News how the Libyan leader has developed a system for making global investments by using minority stakes, shell companies and interlocking share holdings in such a way as to not attract the attention of US authorities. He refers to the activities as 'financial engineering.'"
  
"The portfolio includes a 5 percent stake in Banca di Roma SpA - Italy's fourth-largest bank - US$1 billion in British real estate and stakes in 72 companies in more than 45 countries. Libya also has stakes in more than 100 banks with offices ranging from New York to Hong Kong. The complex web of shareholdings that Gaddafi has created and nurtured over the past 15 years shows how easy it is to evade embargoes and sanctions by moving money around the globe."
  
"A US Treasury Department chart on Libya's international banking connections traces 103 firms and their partial or indirect ownership by the Central Bank of Libya. Only 28 of the 103 companies make the US blacklist. For instance, UBAE Arab Italian Bank SpA, based in Rome, isn't on the US blacklist. It's 44 percent owned by Libyan Arab Foreign Bank, but counting the 12 percent held by Banca di Roma, 56 percent is linked to Libya."
  
"Another bank that doesn't make the blacklist is Arab Banking Corporation, which is 27 per cent owned by the Central Bank of Libya. The bank has offices on New York's prestigious Park Avenue and in Washington, it throws some of the biggest parties at meetings of the International Monetary Fund and the World Bank."
  
Libya has forged partnerships with some of Europe's biggest banks, including HSBC Holdings Plc. Libyan Arab Foreign Bank owns 25 percent of London-based British Arab Commercial Bank, which is 47 percent owned by HSBC, Britain's largest bank.
  
"HSBC was a BACB founding shareholder in 1972, and HSBC executives and the chairman of Libyan Arab Foreign Bank sit on the board of BACB, which is a correspondent bank of Al-Shamal Islamic bank, founded by none other than Osama bin Laden." "BACB is a UK-licensed bank and regulated by the UK authorities, who are aware of the share holding by the Libyan bank and satisfied with it," explains Richard Beck, an HSBC spokesman in London.
  
"Oilinvest Group, whose main asset is Italy's Tamoil Italia SpA; 6 percent of Groupe ONA SA, Morocco's largest company; 16 per cent of Olcese SpA, a century-old Italian cotton company; and 48 percent of Malta's Corinthia Palace Hotel Company Ltd. Another long-standing investment is US$1 billion of UK real estate, most of which is in London's financial district."
  
Huwej wants to invest directly in the US, where all of Gaddafi's assets, a total of about US$1 billion - largely deposits belonging to Libyan Arab Foreign Bank - have been frozen since 1985.

In another report on Huwej and Qaddafi's finances, it was revealed that in 1999, Qaddafi met with Saudi Prince Alwaleed bin Talal (a board member of the Carlyle Group) in his tent in Tripoli to discuss ideas for investing some $6 billion, and "agreed to build a hotel together in Tripoli, and Qaddafi invested $22 million for a 13 percent stake in the prince's Middle East Hotels." 

Alwaleed "expects to do more deals with Qaddafi in the future, U.S. sanctions or not. 'I'll make him a value investor,' says the prince, who's known for buying beaten-down shares he considers good values, including big U.S. companies like Citigroup Inc., Apple Computer Inc. and AOL Time Warner Inc."

Huwej "knows that he's on another U.S. blacklist, one compiled by the U.S. Treasury's Office of Foreign Assets Control (OFAC) that names people and organizations with which it's illegal for Americans to do business. 'My name is at the top of the list,' Huwej says in an interview at Lafico's Tripoli offices, laughing. 'You talk to me, it's a fine of $250,000. OFAC taught me a lot of lessons. When we move, they follow us.' Huwej insists that the U.S. unfairly demonizes Libya with baseless propaganda."

Rogue No More

Libya's increasingly intimate dance with the United States is a "pragmatic" solution, if a costly and tricky one to maintain. Libya reaps financial windfalls, and status as a "returning fugitive to the world community," while opening itself up to military and diplomatic controls imposed by the UN and the US, and perhaps down the road, to bodies such as the IMF and the World Bank. Meanwhile, the Anglo-American and foreign elites will exploit the oil and gas wealth of Libya and surrounding energy-rich (and militarily strategic) African/Mediterranean region, vying for dominance of Peak Oil and post-carbon. And in the short-term, George W. Bush has yet another opportunity to sneer and posture in an election (re-selection) year. 

An older Muammar Qaddafi, sitting fat and happy in oil and gas-rich Libya, eyeing future status as a pan-African statesman, now clearly sees more value in his skills as a well-paid salesman, investor, world elite, and comprador in an environment of US superpower domination.

What remains of the "mad dog of the Middle East" and the "no-good lousy bum" (both characterizations of Ronald Reagan), and the pan-Arab firebrand of resistance against "Western imperialism," appears to be long gone.

Larry Chin is a freelance journalist and an Online Journal Associate Editor.