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Oiling Libya's diplomatic wheels

Douglas Fraser | 06:51 UK time, Wednesday, 19 August 2009

The decision about the release of Abdelbaset Ali Mohmed Al Megrahi, the only man convicted of the Lockerbie bombing, requires a balance of justice with compassion.

But of course, there's a bit more to it than that.

The Libyans have made no secret that such a release or transfer would help to normalise its place in international relations.

It has already taken itself out of the rogue states category, renouncing any nuclear weapons ambition and distancing itself from sponsorship or support of terrorist groups.

Without sanctions since the process started 10 years ago, it's also talking business.

There can be few economies so dependent on one product, with 95% of export earnings from petroleum products.

Before that was discovered under the desert, this was one of the world's poorest nations.

Russan dependency

And there's lots more where that oil and gas came from.

Gas supplies are seen as an important alternative source for Europe, piped through Italy and in liquid form by ship, to avoid over-dependency on Russia.

But there are concerns Moscow is cosying up to the Tripoli government with transfer of weapons technology, as a means to exert more influence over the North African state than Europe and the US.

That's what took Prime Minister Vladimir Putin to Libya last year.

In Tripoli, economic reform includes a slow reduction of subsidies and a form of socialist privatisation - handing assets over to workers and the public.

There is also a recognition that the current lack of diversification in the Libyan economy means it must look to the post-oil era. There's only so much of a future in selling dates.

Its plans include the growth of tourism and the managing of its oil wealth.

Financial services

The tourism appeal, learning from neighbouring Tunisia's success, includes long beaches and impressive antiquities along the coastline.

The management of oil wealth is one of the bigger parts of Britain's current exports to Libya, providing financial services.

Tripoli is also on the lookout for investment opportunities. Britain's second biggest oil refinery, Stanlow in Cheshire, currently owned by Royal Dutch Shell, is reported to be an asset for which the Libyan National Oil Company is jointly bidding.

Of course, the business opportunities in the other direction are a key part of British and other nations' thinking, with £280m in exports last year.

France and Italy are other trading partners to watch.

Libya's not got a reputation as being an easy place to operate, but there are opportunities in financial services, construction, education and healthcare.

The big prospect is in selling oil and gas know-how to an industry with badly constrained infrastructure.

Meeting potential

BP, Shell and BG Group are already in co-operation deals with Libya's national oil and gas company. BP is the biggest British player by far, with an agreement signed two years ago to explore in the west of the country and offshore.

The deal was to invest $900m, under contract to the Libyan National Oil Company, though the oil major expects to sink as much as $1.2bn in the exploration.

If the fields prove to have the potential expected, it could mean a $20bn spend over the next decade.

BG has been in longer, but unsuccessful in the fields where it drilled, so Libya is not seen as one of its priorities now.

Shell signed a deal in 2005 to upgrade an LNG plant, with exploration for gas leading to the first drilling last year.

While there's little that's clear about the decision on the Lockerbie bomber, the speculation extends to rumour that the departure of Megrahi from Greenock prison will open the door to a whole lot more deal-making with the Libyan government.

Shell won't comment on its future plans, and BP's spokeswoman claims the current contract will keep it busy enough for now.

But one sector where the British are already making a significant impact is in the rodent sector.

It may not help the tourism pitch to hear reports of a recent outbreak of bubonic plague in a village near Tobruk, but one result is that British firm Rentokil Initial has found a handy line of business in catching Libya's numerous desert rats.

Update:1850 BST

There's a firm denial from the Foreign Office this evening that any trade deals are dependent on the release of the Lockerbie bomber.

The link between diplomacy and trade is subtler than that.

But there's more information come to light about the extent of the Libyan trade potential. And in updating my previous blog, I now learn that the £280m British export figure for last year only covers visibles. Invisible exports - that's services, and primarily in the finance sector - amount to another £244m.

Imports from Libya to Britain totalled £960m last year, up 66% on 2007.

So far this year, official figures show visible exports to Libya are up 49% on the same period in 2008.

Libya's petroleum sector has a long way to grow. Oil production is currently flowing at 1.7 million barrels per day. That makes this Africa's second largest oil producer, and the largest single exporter to Europe.

Only 25% of Libya's vast surface area has been explored for oil so far. It already has the largest proven oil reserves in Africa, at 42 billion barrels of oil and more than 1.3 trillion cubic metres of gas. "There is every chance that actual reserves are twice as big," according to an official source.

There are over 50 international oil companies already engaged, and Libyan investment plans in exploration and development total $42bn in the next five years.

And where does the oil income leave Libya's foreign currency reserves? With $136bn swilling around, looking for places to invest. The central bank holds around half of that, and the other half is with the Libyan Investment Authority. Handling its wealth is seeing more interest in partnership with foreign banks, which explains why HSBC is one of the British companies already working in Tripoli.

Not much sign of the Royal Bank of Scotland opening a Benghazi branch just yet. But Britain's exports do extend to high street fashion and bling. Not only Bhs and Marks & Spencer have a presence in the country. So too does Monsoon Accessorize.


  • Comment number 1.

    With Rentokil so busy in Libya, the politicians at Westminster should sleep a little easier

  • Comment number 2.

    I hope you're not suggesting that our esteemed and compassionate government is bringing pressure to bear on the Scottish government to release a mass murderer for financial gain. The holier than thou Gordon (son of the manse ) Brown would never stoop to this, however his dark familiar, the evil Peter who last week was sunning himself with Ghadaffi junior in Corfu, might just be able to bring himself to make such a deal.Methinks rentokil could do a more valuable job on the rats who infest Westminster.

  • Comment number 3.

    Al Megrahi, almost makes him sound Scottish, might of course be innocent and the conspiracy theories right for once.

    One thing that does strike me though is the vehemence coming from the USA and Hilary that he he should die in jail. It bodes well for the fair trial and treatment of Garry McKinnon if he ends up in America.

    Our special relationship with them is looking more and more that of the relationship between the bully and the bullied.

    If, as kaybraes suggests, Westminster is putting pressure on us then we should expose that and then reach our own decision on al Megrahi, which should be on compassionate grounds and not for a share, if any, of the spoils.

  • Comment number 4.

    If they let Megrahi out it makes a complete mockery of Scottish justice. They might as well put a price on his head and accept a payment from Gadafi, at least it's more honest. Releasing a convicted mass murderer on compassionate grounds is totally ridiculous. Anyone involved should hang their heads in shame.

  • Comment number 5.

    What price Justice? - an oil contract apparently.
    What a slap in the face for the Lockerbie victims and their families - the Scottish lion has become a hyena it seems

  • Comment number 6.

    It seems rather incredible that it is the American public and politicians that are objecting to the freeing of Al Megrahion on compassionate grounds while the Lockerbie mass murder also included British and other nationalities. Does it indicate that American justice is wholly based on revenge and retribution or do Americans lack the civilizing influence of Europe? Considering that they have the 'death penalty' and their penal system believes in incarceration of the individual - what does that say about their society in general.

  • Comment number 7.

    I'm not sure the release of Megrahi can be entirely put down to pressure from Westminster. The SNP has placed a large part of its basis for an independent Scotland on revenue provided by the oil sector.

    As the wells in the North Sea begin to become uneconomical, many consider the future for the Scottish oil industry will be based on the specialist engineering skills that have developed in the North East. To make use of those skills Scotland will need Libya, as a major area for future exploration, on its side.

  • Comment number 8.

    I`m afraid that compassion does not come into Mr al Megrahi`s release. This is purely the politics of helping the Libyan government spend it`s large petro-dollar surplus.Being completely mercenary about this what do you think would happen if there was a role reversal between UK and the USA? Would they hesitate at releasing him to improve relations - of course not.The man is going to die if by releasing him now it secures better business relations with Libya - so be it. Unfortunately, as with most things in life sometime the feelings of a few are sacrificed for the greater good

  • Comment number 9.

    It is interesting reading the comments about how this is not about oil, Libya's money, or how 'we' Americans would act. It sounds like there is some denial of how poorly the British government and PM Brown has acted.

    With that said enjoy your oil and their money, the oil should be blood red.

  • Comment number 10.

    It appears as though Mr Mandelson has cast yet another one of his many dark spells from which I don't doubt he will benefit from greatly. It seems amazing that there is anyone who isn't justifiably cynical about Mr Macaskill's claim that this is all about compassion. Mr Mandelson was having dinner with Saif al-Islam Gaddafi (who is tipped to succeed his father) one week before Megrahi's release. Miss Marple need not solve this one for us. I think today's episode in bad governance does more than just free a convicted murderer for the sake of oil and gas. It shows the world that the UK is soft on terrorism. For that both Mr Mandelson, Mr Macaskill and anyone else involved in this tragedy of justice should face charges themselves!

  • Comment number 11.

    I feel pretty certain that Peter Mandelson will know something about this. I wish there was a device that could reproduce the images in your brain onto a TV, I would like to see what secrets he holds!

  • Comment number 12.

    tubijvc The words glass houses and stones spring to mind. There are plenty of examples of US government self interest being put before taking the moral high ground and as for the oil being blood red - I believe the oil in Iraq is somewhat redder.

  • Comment number 13.


    Update:1850 BST

    There's a firm denial from the Foreign Office this evening that any trade deals are dependent on the release of the Lockerbie bomber.

    I am in doubt regarding the remarks of Foreign Office...That there is not long-term deals in the pipeline in Libya's oil fields...

    =Dennis Junior=

  • Comment number 14.

    Douglas Fraser:

    The Libyans have made no secret that such a release or transfer would help to normalise its place in international relations.

    That is what the Libyans have always wanted for many years....What they got on 20 August 2009....

    =Dennis Junior=

  • Comment number 15.

    To Kentbluetone, to justify one wrong with another is simplistic at best. I didn't mean to heart your nationalist pride just point out that governments and politicians are all very much alike.

    Hope that Libyan money puts you on the 'higher ground'

  • Comment number 16.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 17.

    This comment was removed because the moderators found it broke the house rules. Explain.


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