When Gaddafi was a cash cow for the US and EU

[A description, written in February 2011, of US-Gaddafi relations during the period 2003-February 2011, when the people’s rebellion destabilized Gaddafi’s reliability as an ally and partner–and the US began searching for new, more reliable brokers for Libyan oil. — Frontlines ed.}

Libya: How Gaddafi became a Western-backed dictator

Italy’ President Silvio Berlusconi and Colonel Muammar Gaddafi.

By Peter Boyle

Updated February 25, 2011 — Links International Journal of Socialist Renewal/Green Left Weekly — On February 22, Muammar Gaddafi was boasting on state TV that the Libyan people were with him and that he was the Libyan revolution, even while his dwindling army of special guards and hired mercenaries attempted to drown a popular revolution in blood.

Civilians were strafed and bombed from helicopters and planes. Snipers with high-powered rifles fired into unarmed crowds. Two pilots flew their fighter jets to Malta rather than bomb their own people and another two are reported to have crashed their jets rather than attack civilians. Sections of the armed forces, several diplomats and a couple of ministers have abandoned the regime and, at the time of the writing, the east of Libya was in the hands of popular revolutionary committees.

And as more sections of his armed forces stared to go over to the people, Gaddafi ordered troops who refused to shoot their own people to be executed.

Gruesome footage of the carnage was revealed to the world despite the Gaddafi regime’s desperate attempts to seal the country by blocking the internet and locking out journalists.

First Gaddafi’s son Saif al Islam (a darling of greedy US and European corporations in recent years) and then Gaddafi himself tried to deny these massacres while simultaneously threatening the Libyan people with ruthless retribution against those who dared to rise up against the regime.

While the regime’s genocide against the Libyan people unfolded, it took days before the US and other Western governments were prepared to condemn the regime for this monstrosity. Even as late as February 23, US President Barak Obama had not condemned Gaddafi by name.

From ‘rogue state’ to neoliberal client

Yet in the 1980s and most of the 1990s the Gaddafi regime was attacked by the same Western governments as a “terrorist rogue state” because of its political and material support to numerous national liberation movements around the world. The administration of US President Ronald Reagan imposed economic sanctions on Libya and carried out bombing raids to try and assassinate Gaddafi.

In 1988, I visited Libya as a journalist for the left-wing newspaper Direct Action and visited Gaddafi’s bombed out home. I wrote several articles describing and defending the 1969 Libyan revolution.

However, in the late 1990s secret negotiations for a rapprochement with the US and other Western governments began. First, UN sanctions were lifted in 1999 and by 2006 the US lifted its own sanctions and normalised relations.

European leaders flocked to Libya with greedy businesspeople hanging on to their coat tails and before long several European oil companies were back in business, with banks, airlines and hotel chains following. Former British Labour PM Tony Blair and scandal-plagued, right-wing Italian President Silvio Berlusconi played leading roles in the process.

Gaddafi’s son Saif was the the neoliberal frontman for Libya. He offered greater access to capital, tax concessions and privatisation. According to an April 2010 report from the Libyan government, over the previous 10 years the the regime privatised 110 state-owned companies. The same report promised to privatise 100% of the Libyan economy over time. The prospect of the privatisation of the oil refineries and other downstream sectors of the oil industry promises lucrative profits.

US interests

Worried that they were missing out to European competition, a group of powerful US companies (including BP, Chevron, ConocoPhillips, Dow Chemical, ExxonMobil, Fluor, Halliburton, Hess Corporation, Marathon Oil, Midrex Technologies, Motorola, Northrop Grumman, Occidental Petroleum, Raytheon, Shell and United Gulf Construction Company) set up a US-Libya Business Association to catch up.

Among the Gaddafi regime’s new lobbyists in Washington was arch neocon Richard Perle, a former Reagan-era US Defense Department official and George W. Bush-era chair of the US Defense Policy Board.

According to US political reporter Lauren Rozen, Perle traveled to Libya as a paid adviser to the Monitor Group, a prestigious Boston-based consulting firm with close ties to leading professors at the Harvard Business School:

A 2007 Monitor memo named among the prominent figures it had recruited to travel to Libya and meet with Gaddafi “as part of the Project to Enhance the Profile of Libya and Muammar Gaddafi” Perle, historian Francis Fukuyama, Princeton Middle East scholar Bernard Lewis, famous Nixon interviewer David Frost, and MIT media lab founder Nicholas Negroponte, the brother of former deputy secretary of state and director of national intelligence John Negroponte.

Several major US oil companies, including ConocoPhillips, Marathon Oil and Hess Corp, now have significant stakes in Libya’s oil industry, according to a fact sheet prepared by Reuters on February 23. However, 80-85% of Libya’s oil exports go to Europe and companies such as British Petroleum, Italy’s Eni, Spain’s Repsol and Royal Dutch Shell have some of the biggest stakes.

Italian interests

In the February 23 issue of the British Guardian, Tom Bawden and John Hooper described the role of Berlusconi in Europe’s courting of the Gaddafi regime:

Gaddafi and Berlusconi have a famously warm personal relationship. Less well-known, however, is the fact that Berlusconi is in business with one of the Libyan state’s investment vehicles.

In June 2009, a Dutch-registered firm controlled by the Libyan Arab Foreign Investment Company, took a 10% stake in Quinta Communications, a Paris-based film production and distribution company. Quinta Communications was founded back in 1990 by Berlusconi in partnership with Tarak Ben Ammar, the nephew of the late Tunisian leader, Habib Bourguiba.

The Italian prime minister has a 22% interest in the company through a Luxembourg-registered subsidiary of Fininvest, the firm at the heart of his sprawling business empire. Last September, the Libyans put a director on the board of Quinta Communications to sit alongside Berlusconiís representatives.

Libyan investors already hold significant interests in several strategic Italian enterprises. They reportedly own around one per cent of Italy’s biggest oil company, Eni; the LIA has an acknowledged 2% interest in the aerospace and defence group, Finmeccanica; Lafico is thought to retain more than 2% of Fiat and almost 15% of a quoted telecommunications company, Retelit.

The Libyans also own 22% of the capital of a textile firm, Olcese. Perhaps their best-known investment is a 7.5% stake in the Serie A side Juventus. But undoubtedly the most controversial is another 7.5 per cent interest in Italyís largest bank, Unicredit.

The European Union’s latest annual report on arms exports revealed Libya’s biggest military suppliers in Europe, reported Deutsche Presse-Agentur:

Italy granted export licences totalling 112 million euros, with a single 108-million-euro licence for military aircraft making up most of the amount, [was the largest supplier]…

Malta emerged as the second-largest exporter, having authorized the sale of an 80-million-euro consignment of small arms…

Germany was third in the list, with 53 million euros of licences, mostly for electronic jamming equipment used to disrupt mobile phone, internet and GPS communication…

France was next with 30.5 million euros, followed by Britain with 25.5 million euros, and Belgium with 22 million euros.

British interests

According to the Guardian’s Bawden and Hooper:

About 150 British companies have established a presence in Libya since the US and Europe lifted economic sanctions in 2004, after the country renounced terrorism, ceased its nuclear weapons programme and handed over two suspects in the Lockerbie bombing case.

The most high profile have been the oil companies, keen to tap Libya’s vast reserves of fossil fuels. In a deal brokered in 2007 by Tony Blair, BP signed a £560m exploration agreement allowing it to search for oil and gas, offshore and onshore, in a joint venture with the Libya Investment Corporation. Shell is also exploring for oil in Libya as western companies seek to capitalise on a country with the largest oil reserves in Africa and substantial supplies of gas.

High street retailers such as Marks & Spencer, Next, Monsoon and Accessorize have also set up in the country to serve the growing middle-class population, as oil revenues have ‘trickled down’ into the broader Libyan population.

Companies such as AMEC, an engineering firm, and Biwater, a waste treatment company, have supplied services to Libya, which is using its oil revenues to reshape the country through an infrastructure spending spree that will cost about £310bn over the next decade.

British exports to Libya have soared to about £930m in recent years, while the business momentum in post-sanctions Libya is so great that the economy managed to grow by about 5% last year, while much of the rest of the world struggled.

Gaddafi’s son Saif, speaking in his private suite in Mayfair’s five-star Connaught Hotel, told the British Daily Mirror in June 2010:

Tony Blair has an excellent relationship with my father.

For us, he is a personal family friend. I first met him around four years ago at Number 10. Since then I’ve met him several times in Libya where he stays with my father. He has come to Libya many, many times.

Libya considered Blair to be a trusted adviser to the Libyan Investment Authority, a role that Blair now denies.

But Blair’s done his dirty job well. As a February 19, 2011 ,report in the British Independent revealed:

Since the warming of relations between Libya and Britain, officers travelled frequently to Tripoli between 2008 and 2009 to train police, and Britain has authorised the export of tear gas, crowd-control ammunition, small-arms ammunition and door-breaching projectile launchers.

Three years ago, ministers agreed to send Libya vehicles armed with water cannons. There are also unconfirmed reports that riot vans made by British companies have been present during crackdowns in the Libyan city of Benghazi, where scores have been killed.

One of the murderous special battalions headed by another Gaddafi son, Khamis, is a British-trained unit, according to a February 21 Associated Press report.

People lose out

While Libya’s oil exports have enabled it to build up foreign reserves of US$150 billion, almost half of its youth are unemployed, according to African Online News, an independent African news agency:

Libya is the richest North African country… But that does not reflect the real economy of the average Libyan, with around half the population falling outside the oil-driven economy. The unemployment rate is at a surprising 30%, with youth unemployment estimated at between 40% and 50%t. This is the highest in North Africa.

Also other development indicators reveal that little of the petrodollars have been invested in the welfare of Libya’s 6.5 million inhabitants. Education levels are lower than in neighbouring Tunisia, which has little oil, and a surprising 20% of Libyans remain illiterate.

Decent housing is unavailable to most of the disadvantaged half of the population. A generally high price level in Libya puts even more strains on these households.

But the key of popular discontent is the lack of work opportunities, which strongly contrasts the Libyan image of a rich nation constantly propagated by the regime and its Soviet-style media.

The few options for ordinary Libyans include the police or armed forces, construction works and petty trade. But even here, contacts and corruption are needed to have a chance.

The oil sector employs only 4900 Libyans with a further 1000 training overseas, according to an October 2010 report by Libyan National Oil Company (NOC).

A revolution betrayed?

In the 1980s, the Gaddafi regime came under attack from the Reagan administration because it took a strong anti-imperialist line and gave financial and material aid to many national liberation movements at the time. There were also some weird right-wing sects seeking and sometimes obtaining Libyan largesse. The Gaddafi regime meddled disastrously and sometimes bloodily in factional disputes within the Palestinian liberation movement.

The Gaddafi regime also claims to have provided its citizens with free education and health, though quality and access was not even. Tellingly, Libyans, who could afford it, have preferred to go to neighbouring Tunisia (which is not an oil-rich state) or to Europe for serious medical treatment.

It provided its workers with some welfare but did not allow trade unions and it certainly it did not treat its significant number of “guest” workers equally or fairly. There were closed labour camps for some of these workers from other countries and trade unions were not allowed. A bizarre personality cult around Gaddafi was obvious and while there was a pretence at popular democracy of sorts through a system of “people’s congresses” these only had a nominal existence.

Left commentator Tariq Ali dismissed the Gaddafi-led 1969 revolution as “all for show, like his ghosted science-fiction short stories”. But there was a political revolution in 1969 that did result in the nationalisation of the Libyan oil industry and some broader redistribution of oil wealth, which contrasted sharply with that in countries like Saudi Arabia. This was a nationalist revolution, similar to that led by Gamal Abdel Nasser in Egypt in 1952, which also called itself “socialist”.

The US and other imperialist governments at the time saw the 1969 revolution as an attack on their presumed right to exploit Libya’s oil resources. David Mack, a former US diplomat and State Department official, explained how the US reacted in the January 2011 Foreign Service Journal:

By 1969, the US and British air bases in Libya were of declining strategic importance, but Tripoli had become a producer of energy vital to the economies of our West European allies and profitable for American companies. While the US still enjoyed a cozy relationship with an aging monarch and his sclerotic political system, Libyan popular attitudes were not isolated from the rest of the Arab world. The war of June 1967 had left Arabs everywhere with a feeling of humiliation and a conviction that Washington had aided Israel’s victory, achieved in large part by its devastating surprise attack on the Egyptian Air Force. This set the stage for the Libyan Revolution of September 1, 1969.

Eventually, U.S. policy adapted to these new realities. Henry Kissinger, who was President Richard Nixon’s national security adviser, claims in his memoirs that he favored a covert action program to overthrow the new Libyan leaders and keep the airbase, but yielded to the State Department view of the primacy of the oil interests and declining value of our military base. Much later, during the Reagan administration, the U.S. supported and provided some military training to Libyan émigré opponents of the Gaddafi regime. They proved unreliable.

According to Henry Kissinger’s memoirs, the government of US President Richard Nixon had prepared a covert program to assassinate Gaddafi and other Libyans who had led the1969 revolution against a corrupt monarchy, but this was abandoned because big oil companies like Exxon and Mobil prefered to cut a deal with the regime, albeit on tougher terms.

The Gaddafi regime has come a long way since then. It was increasingly betrayed promises and gains of  1969, earning an IMF tick of approval for progress in neoliberal reform:

An ambitious program to privatise banks and develop the nascent financial sector is underway. Banks have been partially privatized, interest rates decontrolled, and competition encouraged. Ongoing efforts to restructure and modernize the Central Bank of Libya are underway with assistance from the Fund…

Structural reforms in other areas have progressed. The passing in early 2010 of a number of far- reaching laws bodes well for fostering private sector development and attracting foreign direct investment… A comprehensive civil service reform is needed to facilitate more effective [read lower and stricter] wage and employment policies that would address the needs of a young and growing labor force.

Recent developments in neighboring Egypt and Tunisia have had limited economic impact on Libya so far. To counter the impact of higher global food prices, the government abolished, on January 16, taxes and custom duties on locally-produced and imported food products. Later in January, the government also announced the creation of a large multi-billion dollar fund for investment and local development that will focus on providing housing for the growing population.

The IMF will have to eat that prediction. The stifling political repression (which has been fiercest in the eastern part of the country, which is also the poorest), the corruption, nepotism and flamboyant lifestyles enjoyed overseas by Gaddafi’s children have proved too much. And the stirring example of the youth of Tunisia, Egypt, Bahrain, Algeria, Yemen, Syria, Jordan and Djibouti added the spark.

What has led to this new Libyan revolution is the degeneration of the regime born of the 1969 revolution into a crony capitalism. The popular character of the new revolution is undeniable, it is far from clear what sort of regime will emerge out of it. The same greedy and powerful Western interests that first attacked and then propped up the Gaddafi regime are preparing for a change of tack, including considering direct military intervention.

As the 19th century British Prime Minister Lord Palmerston famously observed:

We have no eternal allies, and we have no perpetual enemies. Our interests are eternal and perpetual … 

Hopefully the makers of the new Libyan revolution will heed the lessons of its own history.

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