Libya Shoots its Trading Partners through an Oil Barrel

The threat of sanctions, such as a travel ban and an assets freeze, will not put Muammar Qaddafi off his violent jag against the Libyan people. From his first day in power 41 years ago, the 68-year old ruler escaped the need to account for his fortune – estimated by some as a staggering trillion dollars – simply by anointing himself "Brotherly Leader and Guide of the Revolution" and "King of Kings of Africa" – i.e. dictator but not president.
In 1970, he nationalized all foreign petroleum assets, in the same year as he instituted laws for cutting off the hands of thieves.
The Brotherly Leader personally vets all government contracts above $200 million, not relying even on the handpicked, non-elected bureaucracy through which he runs the country. Between 60 and 70 percent of his assets are kept in Libyan banks, safe from attempts to freeze them.
European Union member states have carefully tiptoed around taking Muammar Qaddafi to task for his eccentricities, abuses of his people and extreme totalitarian practices, daunted by their dependence on the Libyan ruler's personal involvement in their business interests.
The EU is Libya's biggest trading and export partner. The ninth largest producer in the 12-nation Organization of Petrol Exporting Countries – OPEC, Libya exports most of its 1.8 million barrels a day of crude across the Mediterranean to Europe. With the largest proven oil reserves in Africa, Qaddafi holds a powerful lever for keeping Europe in line.

Europeans rush to invest in "The Libyan Revolution"

After 2003, when Qaddafi agreed to dismantle his weapons of mass production program and end two decades of sanctions, there was a rush of foreign investors to the country, led by the UK and Italy and followed by Turkey, South Korea, France and many others. Energy firms led the pack but lucrative arms and construction deals soon followed.
Business soon went two ways:
The Libyan Investment Authority was established in 2006 by the General People’s Committee as a sovereign wealth fund to manage the country’s vast oil revenues and “diversify the dependence of national income.”
Muammar Qaddafi kept an iron fist on every transaction and investment, using his wealth to play off his offspring against each other as they squabbled over pieces of the pie.
Tony Blair's much-criticized Deal in the Desert in March 2004 paved the way for multi-billion contracts including the signing of a BP oil exploration deal worth £550 million.
Italy became Libya's most important trading partner and Germany the second.
Awash in petrodollars, Tripoli invested in Italian companies, while Italian companies jumped on contracts for energy and infrastructure projects in the North African state. By the time of the uprising this month, Italy's biggest oil and gas company ENI was operating 13 oil and gas permits in Libya producing 306,000 barrels a day and preparing to invest another $25 billion there, while Libya owned 2 percent of Finmeccanica, the Italian aerospace and defense company and a 2 percent stake in Fiat's arms, tanks and electronics and nuclear energy technology sections.
This week, as violence escalated in Libya, ENI's shares sank like a stone.

Libya staked in UK banks, influential media and Madame Tussaud

Libya is Germany’s third-largest supplier of oil. Most German investments in Libya are in the oil sector. The principal exports are machinery, industrial plant, electrical goods, vehicles and food. Their links span energy, construction, finance and aerospace sectors
Qaddafi's investments in the UK through LIA are indeed diverse, including a 3 percent holding in Pearson – owner of the Financial Times, 50 percent of The Economist, Penguin Books and Madame Tussaud's wax museum in London – and a small stake in the Royal Bank of Scotland.
The Libyan Foreign Bank (LFB), which is fully owned by the Central Bank of Libya and was established in 1972, owns 83.5 percent of British Arab Commercial Bank (BACB) of London. LFB increased its stake in BACB last year when HSBC, the UK lender, sold its 48.9 percent stake in the company for £56.7 million.
The most high-profile French investors to date are Total, which operates two oil fields and has several exploration projects, and BNP Paribas, which bought into Libya's Sahara bank in 2007.
The most contentions deals contracted with Libya, often with great stealth, were contracts for the sale of French anti-tank missiles and radio communications equipment worth some $400 million, and the UK licence to sell $6 million worth of ammunition to Libya, including sniper rifles – which no doubt served Muammar Qaddafi this week for shooting protesters.

Moscow mum for fear of losing Middle East arms trade

One of the biggest investors in Libya today is Turkey, which has been riding a building boom with some 150 construction companies working on projects worth more than $15 billion dollars.
The questions asked about Moscow's silence on the Libyan crisis are easily answered: Moscow signed an unpublished deal valued at $1.8 billion in January 2010 for the sale of combat and transport aircraft, missile boats, anti-aircraft S-300PMU2 systems, tanks and rifles, a transaction representing a large slice of Russia's arms exports. Moscow also contracted to sell Algeria, another North African country racked by unrest, $1 billion worth of Su-30MKA combat aircraft.
The Russians are staying mum for fear of losing their most lucrative arms trade as a result of Middle East turmoil.
The violence in Libya has prompted some companies to suspend operations and evacuate staff, including the National Iranian Drilling Company.
Most claim that oil and gas pumping continues. However, straight after his fighting speech Tuesday night, Feb. 22, Qaddafi ordered oil exports blocked. The Saudi Oil Minister Ali al-Naimi stepped forward at once with an offer by OPEC to boost output to offset shortages if necessary. The kingdom, the world's largest oil producer, has 4 million barrels a day of spare capacity, said the minister. All the world's producers could pump an additional 6 million barrels a day.
These statements have not tamed energy prices which are flying off the charts as volatility threatens to spill over into other oil-producing countries, including Saudi Arabia, and seriously shake the still fragile global economic recovery. Already, fuel-intensive companies such as airlines are taking a hit on the world's stock markets.