In August, as rebels fought forces loyal to President Muammar Gaddafi, two representatives of a British business consortium took a “rather long and arduous ferry journey from Malta” to the North African country.
“To describe it as a ferry would be very polite,” according to an executive at a London-based global engineering company, whose interests the two men represented. “I think it was a trawler.”
The men traveled to Libya at the invitation of the rebel administration. Britain, along with France and the United States, had given political and military support for the uprising against Gaddafi and sponsored the rebel leadership, the National Transitional Council (NTC). This was a chance to close some deals.
“We had people on the ground in Misrata,” said the businessman, who spoke by phone on condition of anonymity. “You could still hear ordnance from the center of Misrata, so it was very much an ongoing situation. But they were already talking about training and equipping fire brigades, training and equipping police.”
The visitors keep coming. In the lobby of the Tibesti Hotel in the rebel stronghold of Benghazi, opportunists mix with diplomats, journalists and aid workers. With NATO’s help, the rebels have deposed Gaddafi and now control Tripoli, the capital. Elsewhere fierce fighting continues and Gaddafi remains holed up. The country has yet to pay its workers, write a new constitution or even name a transitional government. But it is a land with deep pockets, and plenty of new friends.
French President Nicolas Sarkozy and British Prime Minister David Cameron received a heroes’ welcome last week when they became the first western leaders to visit since Gaddafi’s ouster. Interim leader Abdel Jalil said the rebels’ allies could expect preferential treatment in return for their help. It was a clear signal that countries which had not backed the NATO bombing campaign, including Russia, China and Germany, or which were slow to denounce Gaddafi, like Italy, stand to lose out.
But if French and British politicians are tallying up the contracts, business executives are leaving little to chance. Foreign companies withdrew from Libya at the outset of the NATO bombing campaign; sanctions imposed on Gaddafi’s regime since February have added to the difficulty of doing business.
Despite this, dozens of executives from France, Britain, Italy and other countries have spent months building ties with potential Libyan partners. In a country fractured by tribe and politics, they say it is relationships that will prove decisive.
The potential profits are huge. While there are pockets of damage to infrastructure and former Gaddafi command centers, the country is in far better shape than Iraq was after the fall of Saddam. At the same time, Libya needs new investment in everything from schools to services. According to the French business federation, Libya should offer around $200 billion in investment opportunities over the next 10 years. With a population of just over 6 million and Africa’s largest oil reserves, it has plenty to spend. Up to $170 billion worth of frozen Gaddafi-era assets alone should help pay for reconstruction. Here’s how companies are playing this new front in the latest scramble for Africa.
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Western firms, including trading houses Vitol, Trafigura and Gunvor have already been busy. A London-based team for Vitol sold oil products to the rebels in large volumes as early as April, and helped ship their first crude oil cargo. Trafigura expressed interest, although it is not clear if anydeals were concluded.
France landed executives in Benghazi in June and July, according to Michel Casals, head of the Franco-Libyan Chamber of Commerce.
“There’s no point going when people are not ready, but we can’t go in six months when everybody has already been there,” says Thierry Courtaigne, director general of French business lobby Medef International, which represents the interests of France’s top companies overseas.
At the same time, some firms remain wary of doing business with the rebels in case they break international sanctions. Though those sanctions are now easing — Europe and the United Nations have eased theirs — U.S. firms in particular are hesitant. One engineering executive expressed optimism about the potential in Libya “once things get going” and said he has been attempting to rekindle old relationships. But he, along with another U.S. company official, said sanctions left them unsure about how much they can do. Many told Reuters they are waiting for guidance from Washington.
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Political support can help with access, and with the law. Sarkozy has hotly denied talk of “under the table deals for Libya’s riches”, including reports that in return for French help, oil group Total will be given preferential access to Libyan oil. Nonetheless, Paris has been frank about the payback it expects in return for spearheading NATO’s mission.
“The President took political and military risks, and all that creates an environment where the Libyan authorities and the people know what debt they owe France,” French Trade minister Pierre Lellouche told a September 6 symposium on the NTC arranged by the Franco-Libyan chamber of commerce. “We aren’t going to get embarrassed by helping our companies benefit from this advantage.”
In April, when Vitol shipped out rebel-produced oil, it had backing from the office of British Foreign Secretary William Hague, oil and diplomatic sources say.
A special group referred to by UK media as a secret oil cell, backed by British Prime Minister David Cameron, was staffed by a handful of officials and supported by Britain’s MI6 secret intelligence service, a diplomatic source said.
A European diplomatic source told Reuters members of the unit are also involved with smoothing the way for major oil companies to get back into Libya. The firms need advice on security, who to speak to and the life expectancy of the new administration, the person said.
A UK government spokesperson contacted for this report confirmed the oil cell’s existence.
“Oil was central to Gaddafi’s war machine,” the spokesperson said in a statement. “Disrupting the supply and constricting his ability to raise revenue through sales hindered his ability to brutalize Libyan civilians. The Oil Cell also worked on how to support the resumption of the Libyan energy sector post-conflict and fed into broad planning, given the importance of this in providing a sustainable revenue source and meeting Libya’s own fuel needs.”
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For Italian oil and gas group Eni, Libya’s biggest foreign oil operator, Silvio Berlusconi has been less of an asset. The Italian Prime Minister’s friendship with Gaddafi meant Rome switched allegiance to the rebels much later than other western capitals. Berlusconi said turning on his old friend made him feel “very bad”.
“April was a critical time and Eni wasn’t there from the beginning. Oil and politics are mixed,” said a source at Benghazi-based oil firm Agoco. “If we have two companies, Chinese or French, of course we choose the French. When the revolution started the Italians thought Gaddafi would win. They made a bad calculation.”
Eni has since made regular contact with the NTC, hoping its dominant position in Libyan oil production makes it indispensable, at least in the short term, says a person familiar with the company and its thinking. Italy’s foreign minister Franco Frattini says he recently met rebel leader Mahmoud Jibril, and expects him to visit Italy soon.
Eni’s chief executive joined top oil officials for a beachfront lunch in Benghazi in August and Nuri Berruien, the chairman of Libya’s National Oil Corporation, told Reuters the two firms had installed a “floating hotel” to provide accommodation for workers on an offshore gas field.
Russian firms face a similar bind. Moscow was highly critical of the west’s backing for the rebels and only recognized the NTC as Libya’s legitimate authority a few weeks ago. In August, Russia called a French arms drop a “crude violation” of the U.N. weapons embargo.
State arms exporter Rosoboronexport, previously a major supplier to Gaddafi, has estimated its losses as a result of the change of regime at $4 billion. The chairman of the Russia-Libya business council described the fall of Gaddafi as a disaster for Russian business interests, which extend into infrastructure projects and energy.
But by the end of August — before Moscow had recognized the NTC — Russian refined products had already been sent to Libya through Swiss-based trading house Gunvor, co-founded by Russian businessman Gennady Timchenko, according to market sources.
State-controlled gas export monopoly Gazprom, meanwhile, last week signed an option with Eni giving the Russian firm the right to acquire half of Eni’s 33 percent stake in the Elefant oilfield in Libya, Gazprom sources said. That option essentially keeps Gazprom’s oil arm in the game until the fighting ends.
