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Mon 7 Mar 2011 04:44 PM

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Out in the cold

Muammar Gaddafi’s closest confidantes have lined their pockets as Western firms poured billions into a rehabilitated Libya. As the country collapses, what now for the Libyan leader's allies?

Out in the cold
Former British Prime Minister Gordon Brown meets with Libyan leader Muammar Gaddafi

It’s Thursday, 25 march 2004. British Prime Minister Tony Blair enters a lavishly decorated Bedouin tent on the outskirts of the Libyan capital, Tripoli, and with an ear to ear grin reaches out to grasp the hand of Muammar Gaddafi. It is the first visit by a serving British leader to the country since 1943, and the meeting between the two officials is warm, with conversations taking place in both Arabic and English. Shortly after the brief discussion, oil behemoth Shell confirms it has won a deal to undertake exploration off the Libyan coast for a cool $900m.

Neither of them is smiling now. Blair’s visit was a remarkable volte face from the UK, given that Libya had been linked to the Lockerbie bombing which killed 270 people in 1988, and that shots fired from its London embassy had killed a British policewoman four years before that. Eyebrows were also raised in Europe given that 24 hours before the tent meeting, Blair had attended a memorial service for the Spanish victims of the worst European terrorist atrocity since Lockerbie.

“It was strange given the history to come here and do this and of course I am conscious of the pain that people have suffered as a result of terrorist actions in the past,” Blair told reporters after the Tripoli meeting. “But the world is changing and we have got to do everything we possibly can to tackle the security threat that faces us.”

But if the world was changing, no-one had told Gaddafi. After years of seclusion from both the international community (due to UN sanctions) and from many members of the Arab community, especially outside North Africa, Libya’s economy was rotting. A population of only just over six million and the largest proven oil reserves in Africa should have left Libyan citizens sitting pretty. But instead of allowing oil wealth to trickle through to all sections of society, as has been the case in countries like Qatar and the UAE, a lack of investment in the energy industry, and a policy of paying off those closest to the regime left most of Libya disaffected, embittered and disenfranchised.

Those closest to Gaddafi, meanwhile, were busily filling their pockets. Last week, the UN Security Council announced travel bans for several key Libyans associated with the regime. Besides Gaddafi and Saif Al Islam, six other sons, and a daughter, Aisha Muammar Gaddafi, have also been named. Other officials facing a travel ban include Abdulkader Mohammed, head of the liaison office of the revolutionary committees, and chair of the Libyan sovereign wealth fund, Abu Zayd Umar Dorda, boss of the country’s external intelligence directorate, and Abdullah Senussi, Gaddafi’s brother-in-law and director of military intelligence.

Gaddafi had other reasons to seek Western support as well. The US-led coalition invasions of Afghanistan and Iraq, in the years previous to the 2004 meeting had left stridently anti-Western dictators in the region looking nervously over their shoulders. If the Libyan ‘great leader’ wanted to maintain the status quo in his own country, he knew he would have to make some diplomatic changes abroad.

Shortly after Blair’s next visit to Libya in 2007, the wheels were set in motion for the eventual release of the man convicted of the Lockerbie bombing, Abdelbasset Al Megrahi. The question as to whether Al Megrahi’s release in 2009 was a quid pro quo for the opening of the Libyan market is still open to debate, but there is no doubt that after 2007, outside firms suddenly found it a lot easier to win deals.

When UN sanctions were relaxed, the money flowed in. Western governments even coined the phrase “the Libya model” to describe the successful rehabilitation of an international pariah. Recent visitors from the Gulf to Tripoli have felt right at home on arrival at the city’s battered old airport. On the short drive north into the heart of Tripoli, you are greeted with pockets of frenzied construction, and with billboards plastered with the names of some of the Gulf’s most famous developers. Although there are few choices in terms of hotels for Westerners, five-star locations such as the Corinthia Bab Africa have acted as a home away from home for airline staff and businessmen holed up next to Tripoli’s old city.

But despite the willingness of outside companies to immerse themselves in an untapped economy, it has been a rocky road. Red tape and policy swings that have been subject to Gaddafi’s whims have seen some countries locked out. An incident at a hotel room in Switzerland involving Hannibal Gaddafi, the leader’s son, led to charges of abuse of domestic servants in 2008. In return, Libya withdrew billions of dollars from Swiss bank accounts, and cut oil supplies to the country. As recently as last year, Gaddafi said that Switzerland should be subject to a global jihad. “The masses of Muslims must go to all airports in the Islamic world and prevent any Swiss plane landing, to all harbours and prevent any Swiss ships docking, inspect all shops and markets to stop any Swiss goods being sold," he announced, during a trip to Benghazi.

However, the riches on offer were still too tempting for many international firms. Apart from Shell, BP also signed its biggest-ever exploration commitment in the Sirte basin in 2007. But British firms weren’t the only ones to see the dollar signs — US giant ExxonMobil struck two deals in 2005 and 2008, followed by Russia’s Gazprom, Japan’s Nippon Oil, Brazil’s Petrobras and Canada’s Verenex. All these firms paid hundreds of millions of dollars to secure lucrative rights to Libya’s oil — and this was just on the energy front.

Gulf players have themselves been active on the construction front. Gulf Finance House, the Bahrain-based institution that has been stung particularly hard by the credit crunch, inked a deal with a local firm to start building a $5bn energy city, 70km outside Tripoli, in 2009. Less exposed — but no less concerned — will be Abu Dhabi’s Al Maabar, which had planned to complete a $275m mixed-use development in Tripoli next year. And as Libya pushed to rebuild its dilapidated infrastructure, companies such as India’s Punj Lloyd, United Fiber of Singapore, and Italy’s Impregilo have all stepped in to help.

But fast forward to 2011, and questions are being asked of Western officials whether the move to rehabilitate Libya’s ruling regime in the eyes of the world was worth it. Questions have been asked of Blair as to whether he acted as a go-between for one of his new employers, JP Morgan, and the Libyan sovereign wealth fund.

In a statement issued last week, a spokesperson for Blair’s office said: “Tony Blair does not and has never had any sort of commercial relationship or any sort of advisory role with any member of the Gaddafi family, the Government of Libya, the Libyan Investment Authority nor any Libyan companies.”

Furthermore, Blair’s office has also keen to defend the former prime minister’s role in bringing Libya back into the fold, adding that: “there has clearly been a huge benefit externally of the change in Libya’s position from a state that was developing nuclear and chemical weapons and sponsoring terrorism to a state that in 2003 gave up WMD and is now co-operating in the fight against terror”. While there may be some argument to justify that, the companies that have spent billions on their Libyan projects now face an uncertain future. If Gaddafi somehow manages to hang onto power in the near term, companies from countries that have called for his removal face removal from Libya. But if a new regime takes over, there is no guarantee that contracts dished out by Gaddafi will be honoured.

“The formation of the National Libyan Council to give some form of political direction and personality to the revolution holds out the possibility that any transition from Gaddafi’s rule will not be as chaotic as many observers have predicted,” says IHS Janes’ Middle East analyst David Hartwell.  “The key challenge for the opposition remains attempting to find more issues and concepts to unite around other than hatred of Gaddafi. Meanwhile, the international community is likely to explore all options short of overt military intervention to aid opposition forces.”

If Blair, Sarkozy and company are feeling the pinch, however, that is nothing compared to the straits in which the members of the Gaddafi regime now find themselves. Along with a travel ban, the UN has also imposed asset freezes on Libya’s leader, four of his sons, and his daughter Aisha. Asset freezes and travel bans are likely to be the least of their concerns. A combative relationship with Saudi Arabia means that exile in the Gulf is not an option. If Gaddafi does elect to flee the country, then he is most likely to end up either in Venezuela or sub-Saharan Africa, where similarly long-serving presidents might not object to his arrival. Should the world’s longest-serving dictator take the plunge and fly out of Tripoli, only one thing is certain; competition for places on the plane will be fierce.

Libya’s options

Gaddafi to hold on: He may be holed up in a tiny corner of one of Africa’s largest states, but control over mercenaries, the air force, heavy weapons and loyal regiments from the army mean that Colonel Gaddafi will not go quietly. Unlike regimes led by Zine El Abidine Ben Ali in Tunisia and Hosni Mubarak in Egypt, Gaddafi’s paramilitary forces have no incentive to switch sides, particularly as they will hardly be welcomed by a population they have terrorised for 40 years.

International intervention: US Navy vessels are encircling Libya’s coast, and Britain has already put a battalion on notice to send to the country. Ostensibly, these moves are to assist with the evacuation of civilians, but discussion of a no-fly zone is becoming more prominent. A full military intervention is unlikely however, and could even play into Gaddafi’s hands. If civilians are killed in botched operations, that would present more than a headache for Western nations.

Gaddafi flees or dies: The problems in Egypt and Tunisia show what can happen when long-standing governments are suddenly overthrown. Gaddafi’s departure — alongside that of the regime’s strongmen — would leave a massive power vacuum, which no new council will be able to fill easily. The lack of a stabilising central power could even lead to devolved power in the restive east of the country, which could last for some time.

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