Rebels near an oil refinery in Ras Lanuf in March. (photo: BRQ)

Throughout the Libya war, there has been quite a bit of skepticism about who the rebels being armed were exactly and whether they could govern Libya after Gaddafi was defeated. A political body to represent the rebels, the National Transitional Council (NTC), began to solidify early in the conflict. Its leader, Mustafa Abdul Jalil, has been chairman of the NTC since February. Jalil was Libya’s justice minister, who was sent to deal with the uprising in Benghazi when it began. Jalil “quit in protest” after witnessing the “excessive use of violence against unarmed protesters.”

Jalil has spent the last months earning the support of thirty foreign governments. It doesn’t look like he will have a problem with maintaining support from the very powers, which backed an intervention in Libya. What will likely be the biggest problem is factionalism. As BBC News notes in its profile of Jalil, “Earlier this month, he dismissed his entire executive committee, which functions as a cabinet, following the assassination in July of rebel commander Abdel Fattah Younes.” The killing showed how deep the “tribal divisions and rivalries are within the rebel leadership.”

The powers that have backed the rebels are likely to tolerate a level of violence that results from factionalism, as long as oil production resumes. The first part of a two-part documentary from Al Jazeera English’s “Fault Lines” program on the US in Libya explores how in the midst of the battle against Gaddafi’s forces. It is noted the US is a global power; therefore, it has global responsibilities.

A Washington lobbyist explains Secretary of State Hillary Clinton said rebels should be able to sell Libyan oil. They have been working to keep the oil pumping. Qatar has been able to provide great support by helping to provide a trust fund that could guarantee sales of the oil. And, reporter Sebastian Walker shows the oil facilities have been some of the most secured areas of the country during the conflict.

Where the oil has been going has been kept mostly secret. The fact that oil production continued on some level means the businessmen working to move the oil are likely to be the most organized interest in the country. This means a critical question will involve who controls the oil and what happens with the country’s wealth and whether that money will go into programs like health care, education, transportation, etc or be funneled elsewhere.

A US State Embassy cable on former Secretary of State Condoleezza Rice’s visit to Libya in September 2008 released by WikiLeaks suggests oil companies aren’t likely to wait long to take advantage of the power vacuum and make deals with the rebels. In fact, after reading this cable, it may be worth it to ask, what deals on Libyan oil have been made? And how aware of these deals are governments, who have spent money and resources on the conflict?

Libya’s economy is almost entirely dependent on oil and gas. Libya has the largest proven oil reserves (43.6 billion barrels) and the third largest proven natural gas reserves (1.5 billion cubic meters) on the African continent. Libya currently produces about 1.7 million barrels/day of oil; only Angola and Nigeria produce more in Africa. Oil and gas infrastructure suffered during the sanctions period. The lifting of sanctions has opened the way for new exploration and improved production. New technology and refined management techniques introduced by international oil companies (IOC’s) are a key part of Libya’s plan to increase oil production to 3.0 million barrels/day by 2013. Most of Libya’s oil and natural gas are exported to Europe – Italy, Germany, Spain and France are key customers. Major U.S. energy companies active in Libya include Amerada Hess, ConocoPhillips, Marathon, Chevron, ExxonMobil and Occidental. Joint ventures involving U.S. companies currently account for about 510,000 barrels/day of Libya’s 1.7 million barrels/day production. A large number of small to mid-sized U.S. oil and gas services companies are also working in Libya.

After years of isolation under sanctions and limited spending by the GOL, Libya is currently in the midst of an economic boom, partly driven by a desire to complete large-scale infrastructure projects as tangible symbols of the regime’s achievements in advance of the 40th anniversary of al-Qadhafi’s revolution on September 1, 2009. High oil prices have helped fuel the outlays. Western companies, eager to establish a position in what is expected to be a lucrative market, are arriving in sizeable numbers. A temporary pause prompted by adoption of the Lautenberg Amendment in January 2008 and concern about asset seizure is coming to an end on news of the comprehensive claims agreement. XXXXXXXXXXXX Despite great promise, Libya remains a challenging business and investment environment. Contradictory regulations, inefficient government bureaucracy, limited human capacity and rampant corruption (in 2007, Transparency International ranked Libya 133rd out of 180 countries in terms of being most corrupt) are significant challenges that could hamper greater investment.

In this moment, oil and gas companies can take steps to ensure that regulations, bureaucracy, “limited human capacity,” and “corruption” (which probably means officials who opposed the exploitation of Libya’s oil & gas by private companies) are not part of the new Libya that is about to be born.

Oil and gas companies can also take steps to erase the culture of “resource nationalism” that has been a part of Libya for decades. As a November 2007 cable from Libya on this issue explains, following the lifting of US and UN sanctions and after Libya began to open its resources to business with various companies, the Gaddafi regime moved to increase control over the revenue it would receive from the selling of the country’s hydrocarbon resources.

The surge of investment was a welcome development in Libya, but the “nationalist rhetoric” and policies that resulted was not:

…The regime has made a point of putting companies on notice that “exploitative” behavior will not be tolerated. In his annual speech marking the founding of his regime, Libyan leader Muammar Qadhafi in 2006 said: “Oil companies are controlled by foreigners who have made millions from them — now, Libyans must take their place to profit from this money.” His son, Seif al-Islam al-Qadhafi, said in March 2007 that, “We will not tolerate a foreign company to make a profit at the expense of a Libyan citizen.”

Beyond the rhetoric, there are other signs of growing resource nationalism. — Some IOCs with local subsidiaries have been forced to adopt Libyan names this year, including TOTAL (now officially titled “Mabruk”), Repsol (“Akakoss”), ENI (“Mellita”) and Veba (“Al-Hurruj”), although these names have yet to catch on. — The Libyan National Oil Corporation (NOC) is currently in the process of reworking long-standing oil concessions with several different IOCs (Ref B), in an effort to wring more favorable terms. There is a growing concern in the IOC community that NOC, emboldened by soaring oil prices and the press of would-be suitors, will seek better terms on both concession and production-sharing agreements, even those signed very recently. — Libyan labor laws have also been amended to “Libyanize” the economy in several key sectors, and IOCs are now being forced to hire untrained Libyan employees. The Libyan National Oil Company (NOC) has recently begun insisting that deputy general managers, finance managers and human resource managers in local offices of IOC’s be Libyan. — The enactment of Law #443 of 2006 obligated most foreign companies to form joint ventures with Libyan companies in order to operate in the country. (Note: This currently excludes IOCs, but includes all foreign oil and gas service companies. End Note).

Oil companies were troubled by the fact that those who dominated Libya’s political and economic leadership were pursuing increasingly nationalistic policies in the energy sector that could jeopardize efficient exploitation of Libya’s extensive oil and gas reserves.” The diplomat who reported on the rise of “resource nationalism” called for “effective US engagement” that would “demonstrate the clear downsides” of the approach to the Libya government, particularly how this could impact the country’s ability to attract “participation by credible international oil companies in the oil/gas sector and foreign direct investment.”

The heavyweight foreign policy think tank, Council on Foreign Relations (CFR), just released a report, “Post-Gaddafi Instability in Libya,” that attempts to predict what might happen with Gaddafi gone.  The report hones in on how “important” it is to achieve a “united, stable, more open and democratic Libya” so Libya can resume its oil and gas exports. It urges leaders to be aware of the threat to the oil ministry and critical oil installations” in the aftermath of Gaddafi’s regime. And, the report even outlines how oil and gas production could fund the interim government led by the NTC:

A legitimate interim Libyan authority with international community support but no armed peacekeepers. This option would be civilian and perhaps even be paid for by the Libyans, once their oil and gas production is restored. It could be focused on particular capacities—perhaps police, intelligence, counterterrorism operations, or other specialized requirements—that Libya lacks. The UN is currently contemplating a political mission with some attached military observers, but its capacity and willingness to plan a future operation is limited due to political sensitivities within the Security Council.

This suggestion may be as naïve as Paul Wolfowitz’s suggestion that revenues from Iraqi oil could pay for the country’s reconstruction in the aftermath of the Iraq War. However, it points to the reality that foreign policy makers will likely be working closely to get the oil and gas industry moving. Marathon Oil is already in “preliminary discussions” with the NTC, according to MarketWatch.

The Libyan people may be given the right to vote, civil liberties, Internet freedom, majority rule but will they be able to truly reform the economy of Libya? Certainly, Libyans, who have watched as rebels made advances, have been thinking about being able to live in a society where the wealth is distributed more fairly. But, will they have any stake in the decision-making over what to do with their country’s resources?

In 2008, according to another diplomatic cable, the Minister of Economy Dr. Ali Al-Issawy, was looking to privatize health, education, utilities and transportation. Libyans thought they would be negatively impacted, especially in the areas of health and education. The Minister was interested in “joint ventures with US universities,” possibily MIT.

Even more alarming, “The Minister also asked if the Embassy could provide an expert to speak about the mortgage situation in the U.S. since Libya plans to privatize the housing sector and make loans more broadly available to potential home-owners.  He mentioned Freddie Mac and Fannie Mae.” Experts that could engage the Libya government were sought.

It seems reasonable to suggest proponents of privatization are likely to be working closely with the NTC. NATO and other forces/organizations will operate in the country until the country is “stabilized” properly—which could mean until the economy is up and running again or until the right leaders are put in place to ensure the country will be governed by people friendly to key players in the global economy.

The true success of the “Arab Spring” in Libya will depend on the Libyan people’s ability to defend the country from the kind of “shock doctrine” or disaster capitalism that has become a regular byproduct of situations like this that involve international forces.