Gadhafi’s crime: Making Libya’s economy work for Libyans
May 6, 2012 § 4 Comments
“Oil companies are controlled by foreigners who have made millions from them. Now, Libyans must take their place to profit from this money.”—Muammar Gadhafi, 2006.
The Wall Street Journal of 5 May offers evidence, additional to that already accumulated, that last year’s NATO military intervention in Libya was rooted in objections to the Gadhafi government’s economic policies.
According to the newspaper, private oil companies were incensed at the pro-Libyan oil deals the Gadhafi government was negotiating and “hoped regime change in Libya…would bring relief in some of the tough terms they had agreed to in partnership deals” with Libya’s national oil company. 
For decades, many European companies had enjoyed deals that granted them half of the high-quality oil produced in Libyan fields. Some major oil companies hoped the country would open further to investment after sanctions from Washington were lifted in 2004 and U.S. giants re-entered the North African nation.
But in the years that followed, the Gadhafi regime renegotiated the companies’ share of oil from each field to as low as 12%, from about 50%.
Just after the fall of the regime, several foreign oil companies expressed hopes of better terms on existing deals or attractive ones for future contracts. Among the incumbents that expressed hopes in Libyan expansion were France’s Total SA and Royal Dutch Shell PLC.
‘We see Libya as a great opportunity under the new government,’ Sara Akbar, chief executive of privately owned Kuwait Energy Co., said in an interview in November. ‘Under Gadhafi, it was off the radar screen’ because of its ‘very harsh’ terms, said Mrs. Akbar. 
The Journal had earlier noted the “harsh” (read pro-Libyan) terms the Gadhafi government had imposed on foreign oil companies.
Under a stringent new system known as EPSA-4, the regime judged companies’ bids on how large a share of future production they would let Libya have. Winners routinely promised more than 90% of their oil output to NOC (Libya’s state-owned National Oil Corp).
Meanwhile, Libya kept its crown jewels off limits to foreigners. The huge onshore oil fields that accounted for the bulk of its production remained the preserve of Libya’s state companies.
Even firms that had been in Libya for years got tough treatment. In 2007, authorities began forcing them to renegotiate their contracts to bring them in line with EPSA-4.
One casualty was Italian energy giant Eni SpA. In 2007, it had to pay a $1 billion signing bonus to be able to extend the life of its Libyan interests until 2042. It also saw its share of production drop from between 35% and 50%—depending on the field—to just 12%. 
Oil companies were also frustrated that Libya’s state-owned oil company “stipulated that foreign companies had to hire Libyans for top jobs.” 
A November 2007 US State Department cable had warned that those “who dominate Libya’s political and economic leadership are pursuing increasingly nationalistic policies in the energy sector” and that there was “growing evidence of Libyan resource nationalism.” 
The cable cited a 2006 speech in which Gadhafi said: “Oil companies are controlled by foreigners who have made millions from them. Now, Libyans must take their place to profit from this money.” 
Gadhafi’s government had forced oil companies to give their local subsidiaries Libyan names. Worse, “labor laws were amended to ‘Libyanize’ the economy,” that is, turn it to the advantage of Libyans. Oil firms “were pressed to hire Libyan managers, finance people and human resources directors.” 
The New York Times summed up the West’s objections. “Colonel Gadhafi,” the US newspaper of record said last year, “proved to be a problematic partner for international oil companies, frequently raising fees and taxes and making other demands.” 
To be sure, that private oil companies and the US government objected to Gadhafi’s pro-Libya economic policies doesn’t prove that NATO intervened militarily to topple the Gadhafi government. But it is consistent with a panoply of evidence that points in this direction.
First, we can dismiss the West’s claims that it pressed its military alliance into service on humanitarian grounds. As civil strife heated up in Libya, a Saudi-led alliance of petro-monarchies sent tanks and troops to crush an uprising in Bahrain. The United States, Britain and France—leaders of the intervention in Libya—did nothing to stop the violent Bahraini crackdown. Significantly, Bahrain is home to the US Fifth Fleet. Equally significantly, its economic policies—unlike Libya’s under Gadhafi—are designed to put foreign investors first.
Second, without exception, countries that are the object of Western regime change efforts—North Korea, Syria, Venezuela, Cuba, Zimbabwe, Belarus, Iran—have set the economic interests of some part of their populations, or all of it, above those of foreign investors and foreign corporations. True, the economic policies of India, Russia and China are nationalist to some degree, and yet these countries do not face the same extent of regime change pressures, but they are too large for a US alliance to conquer without an onerous expense in blood and treasure. The West targets the weak.
Finally, Western governments are dominated by major investors and corporations. Corporate and financial domination of the state happens in a number of ways: lobbying; the buying of politicians through political campaign funding and the promise of lucrative post-political jobs; the funding of think-tanks to recommend government policy; and the placement of corporate CEOs and corporate lawyers in key positions in the state. To expect that foreign policy is shaped by humanitarian concerns and not the profit-making interests of oil companies, arms manufacturers, exporters, and engineering firms seeking infrastructure and reconstruction contracts aboard is to ignore the enormous influence big business and big finance exert over Western states.
In some parts of the world, the arrangement is different. There, governments have organized their economies to serve their citizens, rather than organizing labor, the country’s markets and its natural resources to serve outside investors and foreign corporations.
For refusing to give their citizens’ lives over to the enrichment of foreign titans of finance and captains of industry, these countries are made to pay a price. Their leaders are vilified by scurrilous propaganda and threatened with prosecutions by international criminal tribunals funded and controlled by Western states; they’re targeted by economy-disrupting blockades and sanctions whose chaotic effects are dishonestly blamed on the governments’ “mismanagement” and “unsound” economic policies and whose aim is to create widespread misery to pressure populations to rise up against their governments; fifth columns are created with Western funding and support to engineer regime change from within; and the omnipresent threat of outside military intervention is maintained to pressure the countries’ governments to back down from putting their citizens’ interests first.
Gadhafi’s sins weren’t crimes against humanity but actions in its service. His reputation blackened, government overthrown, country besieged from without and destabilized from within, his life was ended for daring to enact a radical idea—pressing the economy into the service of the people of his country, rather than the people of his country and their natural resources into the service of foreign business interests.
1,2. Benoit Faucon, “For big oil, the Libya opening that wasn’t”, The Wall Street Journal, May 4, 2012
3, 4. Guy Chazan, “For West’s oil firms, no love lost in Libya”, The Wall Street Journal, April 15, 2011.
5,6,7. Steven Mufson, “Conflict in Libya: U.S. oil companies sit on sidelines as Gaddafi maintains hold”, The Washington Post, June 10, 2011
8. Clifford Kraus, “The scramble for access to Libya’s oil wealth begins”, The New York Times, August 22, 2011.