A few days ago, we had former UNDP head Mark Malloch Brown talk impressively about global events, especially goings-on at the UN in relation to the Middle East/North Africa. One of the things he pointed out was that perhaps an even worse humanitarian disaster is occurring in Cote d'Ivoire. While this is sadly and undoubtedly true, I'll take the crude Marxist route of economic determinism and suggest the difference boils down to energy. Possessed of the finest grades of petroleum reserves--light, sweet crude that is easy to refine--Libya will remain a prize far greater than the Ivory Coast. Tis the way of the world: I am afraid and ashamed of in equal measure.Arguably, two of the countries that have pressed hardest for a no-fly zone over Libya are those with the most commercial interests there. Perhaps it's a matter of saving face. Remember that prior to leading the current international effort to penalize the Gadhafi regime, Nicolas Sarkozy was telling everyone not too long ago that it was OK to sell arms to Libya. Given its imperial history, Italy has invested in Libya and has in turn attracted investment by Libyan powers-that-be. However, the head of Italy's largest petroleum company ENI (formerly Agip), has been thinking ahead about the future implications of sanctions should Gadhafi remain in control--or at least of the key oil-producing regions. From the WSJ:
The head of Italian oil giant Eni SpA called for Europe to drop sanctions against Libya, saying it was "shooting itself in the foot" and endangering its energy security by punishing the Gadhafi regime.Indeed, it's by no means certain that the West will not eventually forgive and forget as it has done in the past. ENI thinking is simple: if the West offends Gadhafi sufficiently but he is not dislodged from power, then there are others who would certainly welcome the opportunity to take its place:
Eni Chief Executive Paolo Scaroni's comments come against a background of threats and warnings by Col. Moammar Gadhafi against foreign oil companies, especially those from countries that have backed the opposition rebels and called for a no-fly zone above Libya...Foreign companies such as Eni, which suspended production and evacuated staff when the violence erupted, are keen to resume operations in a country that holds the largest oil reserves in Africa and has long been considered one of the great unexplored frontiers of the global energy industry.
But they face a dilemma. Libya is likely to face an era of deep international isolation, with a new round of sanctions that could affect foreign oil companies. Those from states that called for Col. Gadhafi's ouster, like France and Italy, may be singled out for punishment by the leader and his inner circle.
And those that try to rekindle their relationship with a reviled regime face grave risk to their reputations in Western markets. "Companies that go grovelling back to Gadhafi are not going to look great in the eyes of Western public opinion," said Samuel Ciszuk, a North Africa energy expert at IHS Global Insight. "It's going to be a very uncertain environment for them."
In interviews published this week, Col. Gadhafi indicated that contracts with Western oil companies could come under review. He told the Italian daily Il Giornale he felt "betrayed" by Italian Prime Minister Silvio Berlusconi, who had previously courted the Libyan leader but called for him to step down after the uprising broke out...Italy has suspended its 2008 "friendship treaty" with Libya and frozen Libyan investments in the Italian economy, including large stakes in defense contractor Finmeccanica SpA and lender UniCredit SpA.Now for more on the BRICS--all of which declined to cast their vote. Permanent security members China and Russia unsurprisingly did not vote on the resolution implementing the no-fly zone. While Russia being attracted to Libya's energy supplies is indeed like bringing coals to Newcastle as the saying goes, the Chinese would certainly welcome the opportunity to expand its access to such supplies. Are they currying favour just in case? In addition to abstaining, both countries now express "regret" over military action.
Asked whether Libya might reconsider its contracts with Eni, the Libyan strongman said he "believes and hopes" that the "Libyan people" would reconsider their economic, financial and security ties with the West. Speaking to Russia Today, the pro-Kremlin channel, Col. Gadhafi said Libya can "no longer trust the West...That is why we would like to invite companies from Russia, China and India to invest in our oil production and construction industries," he added.
Other officials in Libya have said they are eager to have Western companies back. Shokri Ghanem, head of Libya's National Oil Corp., or NOC, and the country's de facto oil minister, said last week that Libya would respect all contracts and wanted its current partners to return to work as soon as possible.
Speaking on the sidelines of a parliamentary hearing on Italy's energy ties to Libya, Mr. Scaroni said imposing sanctions was "shooting ourselves in the foot," because not taking Libyan gas would undermine Italy's energy security. Eni has been in Libya since 1955 and is the largest single foreign investor there; in 2007 it signed a $28 billion deal to extend its Libyan oil contracts to 2042. But sanctions have forced Eni to suspend shipments of the oil it produces there, which account for about a quarter of Italy's oil supply. It also shut down the Greenstream pipeline which supplies 10% of Italy's natural gas.
With Libya's political future still uncertain, Mr. Scaroni appeared to hedge on where Eni's allegiances lie. "Whatever political system there is in the future, it will have its own NOC, which will have contracts and relations with us," he said. "I don't see any reason that these ties should be compromised."
Meanwhile, non-permanent security council members Brazil and India did the same. (Remember, there are five permanent security council members and ten rotating ones--which Brazil and India happened to be at the time of the vote.) Brazil does not lack for energy resources, but India could certainly stand to gain in the aftermath if Gadhafi manages to cling to power. Gadhafi has already suggested as much.
Although I suspect these major emerging economies are more concerned with keeping the principle of non-interference intact, you cannot rule out the possibility of some--particularly China and India--hedging their energy bets. Energy realpolitik--if the Italians can't do without it, imagine how countries many time its size keep it in mind.
Ultimately, it hinges on whether Moammar Gadhafi remains in power or nor. Insofar as Western enforcers of the no-fly zone are reluctant to launch a ground effort lest another protracted counterinsurgency-type challenge appear (as Gadhafi warns), there are any number countries and companies jockeying for position in anticipation of ever after.
