The difference between the Gaddafi government’s oil policies and those that oil importing governments (such as NATO countries) and companies based in them would prefer are one of the main motives for NATO’s military intervention in Libya – and certainly more of a real motive than protection of civilians.
Libya experts like Geoff Simons and Ronald Bruce St. John have described the Gaddafi government’s oil policy as one of playing foreign oil companies off against one another to ensure the best returns for Libya, in deals that get the country the investment and expertise it requires for oil exploration and production. From the beginning Gaddafi’s government used the threat of possible nationalisation in negotiations – a threat that has remained credible as they have sometimes carried it out (e.g in September 1973). (1) – (2).
St. John wrote that ‘In retrospect it seems obvious that the RCC [Revolutionary Command Council including Gaddafi] was determined from the start to reduce oil production to conserve supplies, increase oil revenues by maximising the price, develop upstream and downstream capabilities, and use oil revenues to diversify the economy’ (3).
(‘Upstream’ refers to exploration to find oil and production (i.e extraction) , ‘downstream’ usually means storage, refining e.g oil into petrol, distribution and sale.)
While the details of Gaddafi’s policy have varied, the key aims have remained the same. These aims have often conflicted with the aims of oil importing countries (including all NATO countries) and the oil companies based in them. In his book ‘Fuel on the Fire’ Greg Muttit quotes a report by the US Center for Strategic and International Studies, written by former members of the CIA, US government and American oil companies in 2000. They concluded that, with the increase in demand from developing economies like China, India and Brazil, the ideal scenario from the point of view of oil importers and oil companies based in them would be a 50% increase in production by 2020 to allow oil companies to profit fully from the growing demand and to maintain oil prices at a level low enough to allow continued economic growth in oil importing countries (4).
It’s also likely that Libya developing it’s own refineries (and it’s acquisition of the European oil refining firm Tamoil in 1986 (5)) cut into profits the oil companies could make from refining oil and selling the more valuable final products such as petrol back to Libya, as they do in some oil rich countries (e.g Nigeria ) (6).
The three countries who the CSIS report said would have to maximise production to achieve the 50% increase were Iraq, Iran and Libya – whose production levels were all limited by US government and/or UN sanctions (7). Lifting these sanctions without getting governments who had defied the US either replaced or made to make big concessions would result in huge loss of face and influence for the US government. So the US and it’s allies invaded Iraq and got contracts with their oil companies negotiated while the occupation and insurgency continued, forcing the Iraqi government to negotiate from a position of weakness. They’ve imposed sanctions on Iran and continue to threaten possible military action against it; and they’ve imposed Iraq style sanctions on and carried out air strikes in Libya.
The overthrow of Saddam Hussein failed to promote democracy in the Arab world, but it certainly promoted the interests of US and British oil companies. They got contracts on very favourable terms with the government of Iraq, while hundreds of thousands of their troops and mercenaries were still there (8) – (9). A week after Saddam Hussein was captured by US forces Gaddafi agreed to inspections of it’s nuclear facilities which would be accompanied by the return of US oil companies to Libya, later followed by BP (10) – (12).
While Gaddafi had allowed western oil companies contracts in Libya before the current fighting he was also haggling for a higher share of oil profits from them and hinting at the possibility of nationalisation if they refused. American oil companies became worried he might kick them out (13) – (14).
Oil profits, prices and supplies are one of the real motives for NATO’s intervention in Libya.
(1) = Ronald Bruce St. John (2008) ‘Libya From Colony to Independence’, Oneworld Paperback/Oxford, especially Chapter 8, p145 -148; Chapter 7, p174 – 177;Chapter 9, p250-254, p 260
(2) = Geoff Simons (1996) ‘Libya the struggle for survival’ 2nd edition, MacMillan, London, 1996, paperback
(3) = St. John (see 1 above), Chapter 6, page 145
(4) = Center for Strategic International Studies (2000) ‘The geopolitics of energy into the 21st century’ cited by Gregg Muttitt (2011) ‘Fuel on the fire’, The Bodley Head, London, 2011; chapter 3, pages 35 and 370
(5) = St. John (see 1 above), Chapter7, page 176
(6) = BBC News 6 Jul 2010 ‘China to build $8bn oil refinery in Nigeria’, http://www.bbc.co.uk/news/10527308
(7) = See (4) above
(8) = Gregg Muttitt (2011) ‘Fuel on the fire’, The Bodley Head, London, 2011
(9) = AP 1 Jul 2009 ‘Iraqi government approves BP oil field offer’, http://www.independent.co.uk/news/business/news/iraqi-government-approves-bp-oil-field-offer-1727287.html
(10) = Jordan Times 23 Dec 2003 ‘Libya could provide intelligence bonanza’,http://www.aljazeerah.info/News%20archives/2003%20News%20archives/December/23n/Libya%20could%20provide%20intelligence%20bonanza.htm
(11) = See sources (55) to (59) on this link
(12) = CNN Fortune 28 Jun 2004 ‘Libya's Black Gold Rush With sanctions lifted, Big Oil is lining up to do business with Qaddafi’, http://money.cnn.com/magazines/fortune/fortune_archive/2004/06/28/374397/index.htm
(13) = CNBC 03 Mar 2009 ‘Libya Wants Greater Share of Its Oil Revenue’, http://www.cnbc.com/id/29494495
(14) = Forbes Magazine 01 Jan 2009 ‘Is Libya Going To Boot U.S. Oil Companies?’,http://www.forbes.com/2009/01/22/libya-gaddafi-oil-biz-energy-cx_ch_0122libya.html