Oil and Libya's virtue recovered

Feb 28, 2004 01:00 AM

by Youssef M. Ibrahim

So now the US is going to be friends with Libya, once one of the world's supreme "rogue regimes." American diplomats have travelled to Tripoli, and Libyan diplomats are arriving in Washington. What has happened here?
Is Libya not the country run since 1969 by a ruthless, unbalanced dictator -­ Muammar Gaddafi -­ the man who ordered the blowing up of two airplanes filled with innocent American and French civilians? Is he not the same person who eliminated Imam Musa Sadr, the head of Lebanon's Shiite community; and Mansour Kikhia, his own foreign minister turned dissident? Is he not the one who imprisoned thousands of his own citizens?

He is indeed the same fellow. Yet how does his sudden acceptance square with US President George W. Bush's urging Arab and Muslim states, presumably including Libya, to democratise?
Of the Bush administration's pariahs, none is less worthy of reconciliation than Libya. Unlike Syria or Iran, which are far more important geopolitically, Libya has virtually no influence and is a certified terrorist regime. Why seek its favour?

The first answer that comes to mind is oil. American oil giants have been locked out of Libya and Iran for over two decades, and rivals have taken advantage of this to move in. In the ranking of the world's largest oil companies, American multinationals no longer dominate, with the exception of ExxonMobil.
Robust European competition now comes from France's TotalFinaElf, Italy's ENI, the British-Dutch Shell, the UK's British Petroleum, Norway's Statoil and Spain's Repsol ­- and above and beyond all of these Saudi Arabia's national oil company Aramco, the world's largest. Most of these companies are doing business in the Gulf and elsewhere in the Middle East, where sanctions and hostility have kept US companies out.

America is running out of places where it has an assured supply of oil. The Saudis are growing distant. Iran is out of reach. The North Sea and Alaska, prime sources of oil supplies,are beginning to run dry. That may be why some American officials pushed hard for an invasion of Iraq, seeing it as a potential US gasoline pump that would help loosen American reliance on OPEC.
Except that things didn't quite work out that way. The US is having trouble stabilizing Iraq, let alone returning its oil production to pre-war levels. In addition, Saudi Arabia is turning away from the US in the aftermath of the Sept. 11, 2001, attacks, prompting OPEC to further cut back oil production, raising prices. Venezuela is hostile to the US, and Iran, another major oil producer, is in no mood to collaborate, having been declared part of the "axis of evil."

Oil and politics can mix with worrying consequences. The latest examples are unfolding in places like Iraq and Russia. In Baghdad, the US-appointed Iraqi Governing Council has refused to privatise the oil industry, even as it has passed laws to open up all sectors of the economy to private foreign investment.
Under public pressure, it has said that oil will remain an exception. In Moscow, Russian oil tycoon Mikhail B. Khodorkovsky, the head of the Yukos energy company, is behind bars because he refused to consult the Kremlin about his plans to sell a major stake in his company to ExxonMobil. The man who put him in jail, Russian President Vladimir Putin, embraced a creed shared by all major oil producing countries: Oil is far too strategic a commodity to fool around with.

Looking at oil through the prism of the Gulf, it is easy to see reasons for the sudden US benevolence toward Gaddafi. Simply put, the US has progressively been losing 70 years of its hegemony over a region that contains two-thirds of the world's oil reserves.
Ever since the 1970s, when OPEC began to flex its muscles as an oil price setter (with Libya in the lead), through the 1973 Arab oil embargo that shook Western economies, to the 1979 Iranian revolution that brought Ayatollah Ruhollah Khomeini to power, America's grip on Gulf oil supplies has been slipping. It is no coincidence that some Bush administration neo-conservatives floated the idea before the Iraq war of invading and occupying Saudi oil fields.

China is fast emerging as a prime economic power that will bypass, and compete with, the US as a customer for Gulf crude. As it stands now, most of the region's oil, including that of Saudi Arabia, Iraq, Iran and the United Arab Emirates, is being sold to Asia. For example, only 10 % of Saudi exports land on American shores. Now that the Saudis feel free of the threat posed by Saddam Hussein, they are looking for alternative markets to the United States.
Crown Prince Abdullah's recent historic visit to Russia must have rung a few alarm bells in Washington. During a two-week stay in Saudi Arabia in January, I was told by several senior decision-makers that the kingdom was already looking toward the EU and China to counterbalance the United States.
"Never put all your eggs in one basket," a senior Saudi official explained. The speaker, a prince, joked about giving every citizen of Shanghai, one of China's most dynamic cities, a motorcycle as a gift from the kingdom. "That," he winked, "would be enough to take care of another extra million bpd of Saudi oil exports."

That may be where the sudden fondness for Libya fits in. The Bush administration and the government of British Prime Minister Tony Blair claim the rapprochement with Gaddafi has to do with his vows to abandon Weapons of Mass Destruction (WMD). Yet this is the same spin we heard on Iraq's WMD. Clearly, Libya, a country of 4 mm people and suffering from two decades of sanctions, never presented anywhere near the threat allegedly posed by Iraq.
In contrast, North Korea is a real threat, as are Iran, Pakistan and India. They have the know-how, the scientists and the support of significantly large populations.
But Libya? Give us a break.

Source: The Daily Star
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