Gaddafi is gone, and how. Yet, his legacy would be tough to scratch. The news of his death marks the beginning of a new era for oil exploitation in Libya which markets greeted with a slight dip in oil prices. Today we look back at Gaddafi, oil and his international partners.
Libya's dirty secrets for oil
When NATO strikes started against Libyan military targets, the dictator, Gaddafi, threatened to annihilate the country's oil pipelines to put pressure on NATO. Call it curious coincidence or not, in the following days, key oil ports, Es Sider, Ras Lanuf, Zueitina, Brega and Tobruk, were the first to fall to rebels, rather than the political capitals. After all, crude oil plays a significant centerfold role in the events unfolding in Libya.
Source: Wikipedia, Oil-Price.net
Since the oil industry nationalization by Gaddafi 40 years ago, obtaining Libyan oil contracts was a matter of government diplomacy rather than private business. In a nutshell, who ever sucked up the most to Gaddafi with lavish gifts and would stroke his ego was allowed to dip in Libya's oil. Although Gaddafi was the convenient "one-stop oil shopping" point of contact to Libya oil, his erratic behaviour had many western powers wish for a better business partner, and so many saw an opportunity in supporting the uprising. Step in, NATO.
So, what happened to all the money from oil? For decades, shrewd beyond normalcy, Gaddafi had managed to intercept and invest 120 billion dollars of Libya's oil revenues in foreign assets abroad, mostly in European countries who also consume 85 percent of Libya's crude oil. (Consequently, a lack of infrastructures, and refineries in particular, caused Libya to import almost 65% of its gasoline from abroad, notwithstanding the economic sanctions.)
Considering Libya's population of only 6 million, the 120 billion, now frozen by foreign governments, amount to $20,000 per Libyan capita and if managed correctly can give Libyans better living standards and speed up the country's recovery from civil war; it can also decide whether Libya's future will be filled with prosperity or hardships. However these assets are in the possession of Italy, France, England and the United States, countries who intend to leverage these assets like the proverbial carrot and stick to obtain juicy oil and rebuilding contracts.
Well, not a state secret that western powers need Libya's oil just as much as the Libyan people need income from its oil. Today we will provide a rundown on the dirty dealings, the unorthodox ways by which Libya's oil was made available in the past and going forward.
During the reign of Gaddafi, Italy relied on Libya for almost 22 percent of its oil consumption. In fact, no other western country has stronger ties with Libya, than Italy. Unlike France and England who had colonized most of Africa by the end of the 19th century, Italy was almost entirely devoid of colonies, except for Libya. By 1940, Italy had integrated Libya as a region and significantly boosted the infrastructure there: highways, schools and oil fields were burgeoning and 12% of the Libyan population was Italian. After Libya's independence, its colonial ties remained strong with Italy. Following the 1988 Pan Am jet bombing, US and British oil companies withdrew from Libya while Eni, the Italian oil and gas giant, was rewarded with more oil contracts by Gaddafi for ignoring the incident.
Prime Minister Silvio Berlusconi often partook in public "friendship ceremonies" with Gaddafi and never shied away from appearing with the dictator in public, treating him like a guest of honor and going as far as kissing his hand, a gesture reserved to the Pope. And why wouldn't he? Gaddafi's government owned an estimated 49 billion Euros in the Italian stock market, including 7.5% of Italy's largest bank Unicredit and 2% of Eni, the country's largest oil company. That's enough to have a seat on the board of directors of these companies.
Beyond the economic realm, Gaddafi was also allowed to publicly stamp his influence and image, deep inside Italy's culture, namely football, so dear to Italians . The dictator owns an estimated 7.5% of the Juventus, Italy's most successful football club. The Libyan dictator's son Al Saadi el Qaddafi also "played" for several Italian clubs whose managers were pressured by Berlusconi to let play for a few minutes in official games. In 2002, the Italian football cup was played in Tripoli.
In 2010, while visiting Italy, Gaddafi caused controversy in the very Catholic country by inviting hundreds of Italian models and exhorting these women to embrace Islam.
Before the uprising, France relied on Libya for 16% of its oil. Although not as close knit as Italy, France's relationship to Libya was equally tabloid-centered during the Gaddafi era. Sarkozy departed from previous French presidents by publicly endorsing Gaddafi during state visits, while peddling French military technology to the dictator. Unlike in Italy, this enraged the French electorate who saw in Sarkozy - the first French ruler since Napoleon not of Frankish descent - an egomaniac, aspiring dictator betraying the core French principles of promoting freedom and democracy worldwide. As a result of his apparent closeness with Gaddafi, Sarkozy's popularity plummeted.
But then the tide changed. When the Libyan uprising began (and likely before then) Sarkozy saw an opportunity to please his electorate with a military victory over Libya and ordered air strikes in retaliation for attacks on civilians by Gaddafi's troops, even stepping in front of the US to lead NATO into the conflict. Soon after, France became the first nation to recognize the NTC (National Transitional Council) as official Libyan ruling government. Following France's cooperation with the rebel movement, both politically and militarily, France was awarded the lion's share of Libya's oil. A French opposition newspaper published a copy of a secret contract between Libya's NTC and the French government guaranteeing 35% of Libya's new oil contracts to France.
The UK's relationship to Libya was cold, to say the least, since the Pan Am bombing of 1988 and arrest of Libyan agent Abdelbaset al-Megrahi. But following his non-coincidental release from Scottish prison under medical reasons, England's BP was awarded a $900m exploration contract in Libya, BP's "biggest exploration commitment ever".
During the rebel uprising and the initial repression of civilians by Gaddafi, Libyan bloggers posted pictures of riot gear, tear gas and water cannons provided by England and used by Gaddafi to repress demonstrators. England was quick to correct this PR blunder and redeem itself in the eyes of the NTC by publicly sending over its normally secret SAS elite force to advise and train rebel forces and joining France in the airstrikes. In October 2011, British company Heritage Oil PLC purchased Sahara Oil Services Holdings Ltd, a Libya company authorized to service oil fields in Libya. With 12 billion pounds of Libyan state assets frozen, the UK intends to exert some leverage on Libya to obtain oil contracts.
The US, and Gaddafi
Whereas Italy entertained mutually beneficial relations with Gaddafi, the US-Libyan relations have always been sour. The US has designated Libya as a state sponsor of terrorism since 1979. Following the killing of 2 American soldiers in a Berlin discotheque in 1986, Ronald Regan nicknamed Gaddafi the "mad dog", ordered air strikes against Gaddafi's compound and established a trade embargo against Libya, preventing US oil companies from exploiting Libyan oil fields.
But as Gaddafi softened, the US under President George W Bush repealed sanctions and re-established normalized relations with Libya in 2004 with a keen eye on its oil reserves. Following this, Exxon signed a contract with Libya's state oil company to explore offshore oil deposits. Compared to European involvement, the US is much less prone to court Libya for its oil. But since the US militarily occupies key oil nations like Saudi Arabia and Iraq with ample supplies, it is also less desperate to do so.
Winners take all, the losers?
Yet in this time of turmoil, allegiances and fortunes can change, so too who will receive the promised prospective oil. (See box What makes Libya's Oil so special). Furthermore the establishment of a well armed Libyan islamic state, supported by France and Italy in exchange for Libyan oil contracts, comes at the expense of a new strategical nightmare: North Africa is gradually becoming a massive southern front for Europe.
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