Why did Gaddafi award most oil and gas leases to American firms?

Feb 09, 2005 01:00 AM

The shift of Libya by the Bush administration from terrorist state to poster boy was ratified in January by an important announcement.
On the last weekend of January, the Libyan National Oil Co. announced that 11 of 15 new oil and gas exploration concessions would go to American oil companies. Primary among them was Occidental Petroleum of Los Angeles, a big donor to Republican campaign finances, including to the inauguration.

The LINOCO awards, of course, did not reverse the nationalization of American assets in Libya, which Col. Muammar Gaddafi’s government carried out in 1973 in the context of the Israeli-Arab Yom Kippur War, but the new allocations definitely mean that US companies' involvement in Libyan oil exploration, development and production is firmly re-established, after an absence of 20 years.
American companies launched the oil era in Libya in the 1950s. Libya and the United States began to fall out when Col. Gaddafi and the Revolutionary Command Council of young officers took power in 1969. A bust-up was virtually inevitable, given the young officers' resentment of the heavy US hand in Libyan affairs of that time.

Focal points included an American air base near the capital, Tripoli, the very visible US role in the Libyan oil industry, and the general pro-Western tilt of the Libyan government under then King Idris. Influenced by Arab nationalist sentiment, inspired from nearby Egypt, the young Libyan officers equated pro-Western with pro-Israel. Anger peaked with the 1967 war.
The king was overthrown in 1969, the base closed in 1970, Libyan oil was nationalized in 1973 and the US oil companies left in 1985. Gaddafi was keeping bad company, including radical Palestinian groups and the Irish Republican Army, and pulling America's tail. The United States bombed Libya in 1986, killing Gaddafi’s 2-year-old adopted daughter and nearly getting him. He retaliated by organizing the 1988 bombing of Pam Am 103, which crashed in Lockerbie, Scotland, killing 270.

US-sponsored economic sanctions eventually bit into Libya's oil-producing capacity. With shrinking receipts to fund his schemes and to keep his own people happy, Gaddafi began to think that he had better find some way to rejoin the international economic and political community.
He had never totally lost touch with the American oil crowd. In 1984 he launched a long-term $ 25 bn scheme to pipe water from aquifers under the Libyan desert to the coast. He called it "The Great Man-Made River Project." The prime contractor was Halliburton, headed from 1995 to 2000 by now US Vice President Dick Cheney. This was able to occur in spite of US sanctions maintained against Libya by handling the matter through a foreign-based Halliburton subsidiary.

Gaddafi must have known his redemption was near at hand when President Bush did not include Libya alongside Iraq, Iran and North Korea in the "axis of evil" triptych in the 2002 State of the Union address. US-Libya relations had been bedevilled since 1988, in spite of the 2000 conviction of one of the Libyan plotters of the Pan Am 103 bombing, by the financial and other claims of the families of the flight's victims, supported by the American-Israel Public Affairs Committee. Gaddafi moved quickly to offer each family $ 10 mm in an effort to remove that barrier to better relations.
When Sept. 11 struck, Gaddafi quickly expressed sympathy and offered intelligence cooperation with the United States in flushing out terrorists. When during the campaign, Bush was looking for cases in point in order to argue that what the United States was doing to Iraq was setting an example to other fearful tyrants in the Middle East, Gaddafi stepped forward to renounce Libya's weapons of mass destruction programs in a quest for Middle East poster child status.

The announcement of the awarding of most of the oil and gas leases to American companies was the icing on the cake for the Bush administration, known for its friendly relations with US oil companies.
Why did Gaddafi do this? He certainly hasn't completely cleaned up his act, having recently tried to arrange for the assassination of Crown Prince Abdullah of Saudi Arabia in return for a verbal slur the crown prince delivered to him in an Arab gathering.

There are at least two possible reasons for the turn-about. One is that Libya's oil industry has been dropping behind in technology, its access to it stopped or made more difficult by Libya's international skunk status. Gaddafi wants the money, either because he wants more money for his people, or, because he knows that eventually someone will figure out how to get rid of him, as they did his predecessor King Idris, if they are convinced he is corrupt and hogging the oil money.
There is also a possibility that he thinks Marshal Bush will be coming after him next, although his omission from the "axis of evil" list would indicate otherwise.

The other, perhaps excessively sentimental view is that Gaddafi is now thinking about his heritage and succession. The once terrible young colonel is now 62. He has sons. Observers say that he may have in mind handing over power to one of them. It happened in Syria. Egypt's President Hosni Mubarak is apparently thinking about it.
One of Gaddafi’s sons is political; another is a famous soccer player; a third is an army officer. This could be interesting, but at least, there will be more cash around with American oil companies back in the picture. It was an oily transformation.

Source: PG Publishing
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