21 Feb 2011

Libya, BP, the curse of oil, and what Gaddafi Jr failed to learn at the LSE

It was an extraordinary speech from Saif Gaddafi for many reasons last night.

If it was not the drug-crazed youth, it was foreign imperialists, people in Manchester – or Canadians – behind a remarkable wave of rebellion against over four decades of his father’s rule.

I reported on this yesterday. We contacted three people in Benghazi and Tripoli. It was clear that the rebellion in the east of the country was winning and was becoming armed with heavy weapons and artillery garnered from the Bayda area in the east.

More ominously for Saif, the protests were also spreading to Tripoli and beyond to Zawiya, between Tripoli and Tunisia. The eyewitnesses painted a harrowing story of French-speaking “mercenaries” randomly shooting from cars, alongside retribution, and fear for lost family members.

In his speech, Saif repeatedly mentioned oil, alongside the possibility of Libya splitting in two, and secession of the protester-held areas and oil. There is a micro and a macro reason why this is highly significant.

Firstly BP. Here is a map that I failed to get on air in last night’s report.

It is BP’s own map of its two oil concessions in Libya, signed with great fanfare during the last few weeks of Tony Blair’s premiership in May 2007. Look at the offshore Sirt block, in the Gulf of Sirt. It is the size of Belgium.

It is, of course, thousands of feet underwater. Yet, according to a Reuters report last week, BP said it was going to start offshore exploration drilling within weeks – before June. 3D seismic has already been done by a Norwegian company. Drilling was delayed, partly because of Libyan concerns about the Gulf Oil spill. This morning BP announced a freeze on these activities.

Why does this matter? The block ends a stone’s throw from Benghazi. As you may know from my report last night, protesters claim to be in control of most of the east of the country. I showed yesterday corroborated evidence of protesters sporting heavy weaponry taken from, or possibly given by military in the area.

Saif Gaddafi basically corroborated this story last night. He constantly referred to the country splitting in two. And then he made a remarkable play for his people’s loyalty.

Openly talking about secession and civil war, he said: “We live off petrol…Where would the main oil company be? Tripoli or Benghazi?”

The Colonel’s son also referred to a phonecall yesterday with Britain’s Foreign Secretary, William Hague, trying to use it to persuade Libyans that there was an immediate threat of “foreign occupation”. Europe would not allow chaos “half an hour from Crete”, he suggested.

It’s important to state that there is no evidence so far that the UK government has pulled its punches because of oil. William Hague was very strong yesterday on the “horror” of what was happening in Libya.

But how much are BP’s concessions worth now? Who is in charge in Benghazi? For a nation that apparently threatened to pull oil deals because of the incarceration of one man in Scotland, just how secure is BP’s deal with the Gaddafi regime?

There is a broader point here. Saif specifically addressed the Facebook-using youth of Libya. Libya, he said, was not Tunisia or Egypt. The key difference: oil. The suggestion: the presence of oil riches would inevitably lead to civil war.

This is called “the curse of oil”. Otherwise resource-rich countries tend to attract a disruptive amount of violent conflict over those resources which eventually makes them poor, except for the rich elite.

More immediately, Libya is the biggest supplier in Africa, with three per cent of world reserves. Experts think that if the supply is interrupted it could be made up elsewhere, but any interruptions would be a hassle to southern European countries that are dependent on Libyan crude.

More pertinently for Libya, oil/gas revenues are 75 to 90 per cent of the nation’s exchequer income. This revenue has and will underpin one of the countries with the highest GDP per capita in Africa. The issue is that it was never spread this widely by the Colonel’s revolutionary regime.