First Published: 2011-09-06

 

Winners and Losers in Libya: Western Companies Win, Chinese Lose

 

Losing out on Libya’s post-Gathafi reconstruction is likely to constitute more than just a commercial loss for China, says James M. Dorsey.

 

Middle East Online

The winners and losers in the competition for post-Gathafi reconstruction contracts are starting to emerge as rebel officials turn their attention to rebuilding their nation’s severely damaged oil industry even as they are posed to attack the former Libyan leader’s last remaining strongholds.

The list of likely winners is unsurprising: western oil traders, first and foremost among which Dutch-Swiss oil trader Vitol as well as Geneva-based Trafigura and Cyprus-register Gunvor, which supplied badly needed fuel to the rebels during their six-month-long fight to topple Libyan leader Moammar Gathafi and oil companies ENI of Italy, Spain’s Repsol, France’s Total, Austria’s OMV, British Petroleum, Royal Dutch Shell, Germany’s Wintershall and Occidental Petroleum, ConocoPhillips, Amerada Hess and Marathon of the United States even if many of them refused to take the risk of working with Mr. Gathafi’s opponents until they effectively were in power.

Perhaps more telling is the list of countries whose companies are struggling to ensure that they retain or gain a stake in the expected Libyan boom: China, Russia, India, Brazil, South Africa and Algeria. China and Algeria are certain to find the going tough at best. While all these countries, with the exception of Algeria, refrained from voting in March favor of the United Nations- imposed no-fly zone in Libya and NATO backing for the rebels and criticized NATO’s military campaign, China and Algeria stand accused of actively supporting Mr. Gathafi and in China’s case even violating a UN arms embargo.

Both China and Algeria alongside South Africa already got off to a bad start by refusing to recognize the rebel Transition National Council (TNC) as Libya’s legal authority even though it controls the country with the exception of a few pockets and enjoys the support of the United Nations and much of the international community. Algeria added fuel to the fire last week by granting refuge to one of Mr. Gathafi’s wives as well as several of his children. Algeria and South Africa moreover have emerged as alleged collaborators in potential Chinese arm sales to Mr. Gathafi as late as July.

Senior Libyan rebel officials have warned that China’s apparent willingness to work against them was certain to impact China’s access to post-Gathafi opportunities. The growing anti-Chinese sentiment is backed by statements by rebel military commanders that they have evidence of Chinese arms deliveries to Mr. Gathafi’s besieged forces. The Chinese foreign ministry was forced to admit this week that state-run arms companies had in July negotiated arms deals with representatives of Mr. Gathafi, but that it had not been aware of the talks and that no arms were delivered. The admission followed the publication by a Canadian newspaper of minutes of meetings in Beijing of Gathafi representatives with the Chinese companies.

Even if China’s oil dealings with Mr. Gathafi’s Libya, which has Africa’s largest reserves, were minimal, its infrastructure contracting business was substantial. China had an estimated $18 billion in infrastructure-related construction contracts and imported 150,000 barrels a day of oil or three percent of total crude imports through Unipec, the trading arm of its state-owned oil giant Sinopec. With the newly appointed rebel chairman of the National Oil Company, Nuri Berruien, estimating that it will take Libya at least 15 to 18 months to return to its pre-crisis production level of 1.6 million barrels of high quality crude a day, the stakes are high for China and others reluctant to accept that realities in the North African nation have changed.

Getting Libya’s key industry and infrastructure back on track is no mean task. For starters, oil facilities in regions that were controlled by Mr. Gathafi’s forces for much of the civil war have to be demined and a large number of booby traps have to be removed. Security personnel have to be persuaded to return to their jobs and in many cases trained. Looted equipment has to be replaced, oil wells have to be checked for war damage as well as damage stemming from months of inactivity. Speaking to the Financial Times, Mr. Berruien said that foreign companies would need to help Libya replace submerged pumps and drill new wells in the Sirte basin that produces two thirds of the country’s oil. Not to mention pipelines and oil terminals.

Losing out on Libya’s post-Gathafi reconstruction is likely to constitute more than just a commercial loss for China. It puts China on the wrong side of history in a region in which three out of five countries – Egypt, Tunisia and Libya – have this year freed themselves from the yoke of an autocratic leader while the leaders of the two others – Morocco and Algeria – are working hard to ensure that they do not suffer the same fate. It also serves as a warning of the risks involved in a broader swath of land that stretches to the shores of the energy-rich Gulf that is pockmarked by popular revolts as in Syria and Yemen and countries where discontent is boiling near the surface. At stake is China’s place not only in Libya but in a key strategic, resource-rich part of the world as the winds of change inevitably spread.

James M. Dorsey is a senior fellow at Nanyang Technological University's S. Rajaratnam School of International Studies in Singapore and the author of the blog, The Turbulent World of Middle East Soccer.

 

Israel shells Gaza just hours after truce

Libya jihadists declare Benghazi ‘Islamic emirate’

Morocco king deplores unequal wealth distribution

US plans largest ever sale of lethal missiles to Iraq

Qatar invests in Israeli soccer

Baghdad bomb blasts kill at least ten

Identification of Air Algerie crash victims ‘could take years’

Philippines prepares to evacuate 13,000 citizens from Libya

Jihadists fight on more than one front in Syria

Sudan Christian woman chooses US as final destination to settle down

France moves to disband violent Jewish group

Chief of Iran Quds Force ridicules calls to disarm Hamas

US supports Israel with weapons, Gaza with sweet words

Syria Kurds battle jihadists killing nearly 50

West watches post-Gathafi Libya descend in chaos

Carnage in Gaza Strip as death toll passes 1,300

Mosul’s residents rise up against jihadists

Militants fire at Tunisia army helicopter

Islamists capture key Benghazi army base

16 killed in Israeli shelling of UN school in Gaza

Italian fire-fighting planes to come to Libya rescue

Syria rebels advance towards Hama military airport

Bloodshed in Gaza surges amid no truce

Major western powers call for Libya ceasefire

US-Israeli ties sink to new depths over Gaza war

UN warns buying oil from terrorists could lead to sanctions

Air Algerie crash black boxes sent to France

Warning of Tripoli catastrophe after huge oil depot blaze

US, UN call for immediate Gaza ceasefire

Egypt army kills 14 jihadists in restive Sinai Peninsula

Calls for temporary Gaza ceasefire fall on deaf ears

Yemen army foils new Qaeda attempt to seize military posts

Investigators need ‘few days’ to probe cause of Algeria plane crash

Tunisia army suffers more losses in open war with terrorism

Jihadists advance amid escalation in Syria anti-regime offensive

Iraq Shiite militia takes bloody revenge against ‘Islamic State’ in Baquba

Fierce clashes kill at least 38 people in Benghazi

Israel resumes devastating military assault on Gaza

Thousands face famine as food security situation worsens in Somalia

Death toll in Gaza climbs as fragile ceasefire reveals destruction

Egypt summons Turkey charge d'affaires for second time in one week

‘Islamic State’ jihadists dynamite Shiite shrine in Mosul

US evacuates embassy staff in Libya over ‘real risk’

Investigators begin 'difficult' probe into Air Algerie plane disaster

Armed men snatch Head of Baghdad Provincial Council