Winners and losers in Libya: Western companies win, Chinese lose

The win­ners and losers in the com­pe­ti­tion for post-Qaddafi 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 Qaddafi 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. Qaddafi’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. Qaddafi 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. Qaddafi’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. Qaddafi 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-Qaddafi oppor­tu­ni­ties. The grow­ing anti-Chi­nese sen­ti­ment is backed by state­ments by rebel mil­i­tary com­man­ders that they have evi­dence of Chi­nese arms deliv­er­ies to Mr. Qaddafi’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. Qaddafi, 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 Qaddafi rep­re­sen­ta­tives with the Chi­nese com­pa­nies.

Even if China’s oil deal­ings with Mr. Qaddafi’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. Qaddafi’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-Qaddafi 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.

About The Author:
James M. Dorsey is a senior fel­low at the S. Rajarat­nam School of Inter­na­tion­al Stud­ies at Nanyang Tech­no­log­i­cal Uni­ver­si­ty in Sin­ga­pore and the author of the blog, The Tur­bu­lent World of Mid­dle East Soc­cer.

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