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.

 

Horse-trading begins as Tunisia awaits formation of new government

Israel closes al-Aqsa mosque to worshipers in rare move

UK court says Libyan Abdul-Hakim Belhaj can sue over rendition

Syria accuses Turkey of ‘flagrant violation of sovereignty’

Global campaign to end female genital mutilation kicks off

Egypt jails retired general for damaging national security

Gaza civil servants receive delayed salaries

After US criticism, Israel vows no concessions to Palestinians

Libya internationally recognised PM opens doors of dialogue with rivals

Huthi rebels seize stronghold of Muslim Brotherhood in central Yemen

Will Nidaa Tounes shun Islamists in Tunisia government formation?

Egypt starts work on buffer zone along border with Gaza

Turkey Sultan unveils new palace: Another break with symbols of secular state

Heavy toll as ‘Islamic State’ fights for control of Syria oil field

Iran President suffers fresh setback with rejection of Science Minister

Nuclear deal or no deal: ‘Red lines’ lay bare internal divisions in Iran

Heavy security in Mogadishu as UN chief meets Somalia president

Fighters from Free Syrian Army leave Turkey to join Kobane battle

Israel denies banning Palestinians sharing buses

Kurd fighters leave northern Iraq base for Syria deployment

Jordan requests UN emergency meeting over Israel settler expansion

Jerusalem Mayor visits Al-Aqsa mosque prompting anger

Tunisia reinforces commitment to democracy with ‘transparent’ elections

Turkey ‘decides’ for Kobane future: No Kurds, no Assad... Only Free Syrian Army!

Bahrain suspends Al-Wefaq weeks before parliamentary elections

Huge game changer in Tunisia: ‘In-credible’ failure of Islamist Ennahda Party

Libya PM in Khartoum for talks with Bashir

PKK hijack truck seizing explosive substance

Saudi lawyers get jail time for offensive tweets

Ennahda concedes defeat in Tunisia parliamentary elections

Syria rebels launch assault on regime-held city of Idlib

Iraq peshmerga wait for Turkey stance to depart for Syria

Sisi enacts military trials decree to cover ‘existential threat’

US calls for online war against ‘Islamic State’

Donors pledge $8 billion for Horn of Africa

Acid attacks in Iran: Deputy of Judiciary Chief to lead investigation

Lebanon army enters Islamist stronghold in Tripoli

Israel approves plans for 1,000 settler homes in East Jerusalem

Tunisians punish Islamists with massive vote to secular parties

Israel in new show of apartheid: Arabs off Jewish buses!

Abadi in Jordan to seek greater cooperation in battle against ‘Islamic State’

Jihadist activity flourishes in southern Libya

Yemen army allies with Huthi rebels to expel Qaeda

Syria regime air strikes kill 13 children in Homs

‘Outrageous decisions’ fuel new power struggle in Somalia