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.

 

Britain tracks down jihadist network behind concert bomb

Trump to be 'tough' in first meeting with EU, NATO

Qatar probes state news agency hack

Turkey arrests hunger strikers on terror charges

Faz3a, a local NGO mobilising young people to help Mosul refugees

Egypt blocks several media websites including Jazeera

IS suicide bomber kills five in Somalia

Israel uneasy over 'crazy' regional arms race

Algeria president replaces Prime Minister

16 civilians dead in coalition strikes near Raqa

4 arrested in Tunisia anti-corruption drive

German MPs call off Turkey visit as tensions fester

Palestinian hunger strike row draws solidarity, controversy

Britain raises terror alert, deploys troops after concert massacre

At least 20 migrants killed in Mediterranean

Israeli joy at Trump visit lacks substance

Oman evacuates Australian man from Yemen

Bahrain police open fire on Shiite protest, kill five

Jewish extremists ejected from Aqsa mosque compound

Prominent Egypt rights lawyer detained

Oil producers to extend output curbs at OPEC meeting

NATO aims to break Turkey-Austria partnership deadlock

Tunisia tensions simmer after protester's death

Terrorist bomb attack kills 22 at UK pop concert

Bahrain police raid Shiite sit-in killing one protester

Trump says Israelis, Palestinians ‘can make a deal’

Five dead in Syria car bomb attacks

Syria civilians suffer deadliest month of US-led strikes

US forces raid Al-Qaeda in Yemen, kill seven jihadists

Islamists to join Algeria cabinet despite poor results

Tunisia's 2.1% GDP growth marks economic upturn

Trump meets Palestinian leader in Bethlehem

Istanbul demolishes nightclub targeted in New Year attack

WHO says 315 cholera deaths in Yemen in under one month

Trump seeks Israeli-Palestinian peace, lashes out at Iran again

Tunisia police use tear gas on protesters

Palestinians protest for hunger-striking prisoners

GCC and Arab League call for Yemen unity

Turkey's alleged coup ringleaders stand trial

Iran’s reformists sweep to power across major cities

Israel makes concessions to Palestinians 'at Trump's request'

Ivanka hales Saudi progress on women’s rights

Looming showdown between Egypt’s president, judges

Netanyahu says will discuss peace efforts with Trump

Bahrain sentences Shiite cleric to suspended jail term