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The 'Libya's About Oil' Angle

Accusations abound that the West’s intervention in Libya is all about oil.  Qaddafi has painted Western intervention as imperialist from the start of no-fly zone talks.  “The colonialist countries are hatching a plot to humiliate the Libyan people, reduce them to slavery and control the oil,” he has said.  But the Left is exploring this line of thinking as well.  Democratic Congressman Edward Markey puts it bluntly, “We are in Libya because of oil… It all goes back to the 5 million barrels of oil we import from OPEC on a daily basis.”  Canadian economist Michel Chossudovsky takes it further:

This military operation is intent upon establishing US hegemony in North Africa, a region historically dominated by France and to lesser extent by Italy and Spain.

With regard to Tunisia, Morocco and Algeria, Washington’s design is to weaken the political links of these countries to France and push for the installation of new political regimes which have a close rapport with the US. This weakening of France is part of a US imperial design. It is a historical process which goes back to the wars in Indochina…

More generally, what is at stake is the redrawing of the map of Africa, a process of neo-colonial redivision, the scrapping of the demarcations of the 1884 Berlin Conference, the conquest of Africa by the United States in alliance with Britain, in a US-NATO led operation.

Western oil and gas companies moved into Libya after sanctions were lifted in 2005.  Oil industry leaders were optimistic and pressed the U.S. government to normalize relations with Libya.  David Goldwyn, executive director of the U.S.-Libyan Business Association (a group formed in 2005 that includes AIG, Boeing, Booz Allen Hamilton, BP, Chevron, ConocoPhillips, Dow Chemical, ExxonMobil, Fluor, Hess, Marathon Oil, Motorola, Occidental Petroleum, Shell, Valmont, and White & Case), urged the U.S. government to fully restore diplomatic relations with Libya to foster the goal of, among other things, “opening [Libya] to privatization.”

But it didn’t go as well as planned for the U.S. and other Western countries.  Six U.S. companies signed Exploration and Sharing Agreements (EPSAs) with the Libyan government.  A Wikileaks cable from 2008 discusses Chevron’s decision to leave Libya after concluding that its search for oil would be unsuccessful.  Chevron could have concluded a new EPSA but wasn’t that interested due to  what the cable dubs “draconian EPSA terms.”  Another Wikileaks cable from 2008 spells out in greater detail the struggles that Western oil companies were having with the Libyan government.  The big problem, according to the cable, was competition:

Intense competition among foreign oil and gas companies to book reserves in Libya, widely perceived to be one of the relatively few places in the world with significant unproven reserves of sweet, light crude and natural gas, has fueled the trend towards less profitable EPSA”s.

And the specific concern was that Eni, the Italian oil and gas company, had struck an unfavorable deal with Libya, and other companies feared this development would embolden Libya to renegotiate other Western oil and gas contracts:

Its confidence buoyed by favorable market conditions, Libya is playing hardball with the IOC”s [international oil companies], sending a clear message that no deal is beyond renegotiation, no matter how recently concluded or how favorable the terms for the NOC [National Oil Company, the national oil company of Libya].

Because of these negotiation problems, and because no new gas or oil had been found yet, Western companies began preparing to pull out of Libya in 2009.  Chevron and Occidental Petroleum, for example, didn’t renew their licenses when they expired.  Then, last year, when Obama supported Switzerland after Swiss authorities arrested Qaddafi’s son, Libya claimed that it would begin to favor Russia and China in oil and gas deals.

When Western oil companies fled as unrest flared in Libya earlier this year, Qaddafi invited Chinese, Russian, and Indian firms to fill the void.  “We are ready to bring Chinese and Indian companies to replace Western ones,” he said.  Of the West, Qaddafi said, “We do not trust their firms, they have conspired against us.”  That is, except for Germany.  “The Germans have taken a very good position toward us, very different from many other important countries in the West,” he said, asserting that Germany was the only Western country with whom he could foresee doing business in the future.

So is it a strange coincidence that Russia, China, India, and Germany – all countries with the ability to strike oil deals with Qaddafi – were the ones that abstained from the UN Security Council resolution authorizing intervention?  (Brazil, who has billions of dollars of contracts in Libya, also abstained.)  The history of the past couple years should make us curious to look further.  Libya was being a tough negotiator on oil and gas agreements and Western companies feared their endeavors wouldn’t be profitable.

So did the U.S.-Libya Business Association press the U.S. government to intervene in the hopes that U.S. oil and gas companies could strike better deals with a successor regime?  And if so, is this a primary though overlooked reason for the U.S. intervention?  It’s difficult to know.  The U.S.-Libya Business Association, as late as January of this year, still seemed optimistic about what they could accomplish with Qaddafi (see video of a January presentation by David Mack, honorary chairman of the organization, and Charles Dittrich, the executive director  – broken into eight parts).  But, for some reason, in late February, the U.S.-Libya Business Association’s website went down, and remains so.  So we don’t have a way of knowing their views of the current situation or their lobbying efforts since violence erupted.  Though it strikes me as something into which reporters may be interested in looking further.

 

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