The new economic managers are investigating the Gaddafi regime’s shadowy oil contracts and investment portfolio in a bid to raise standards of accountability
This is a revolution in a rich country full of poor people: the country has overseas holdings of more than $170bn and the biggest oil reserves in Africa. That was the first message from Ali Tarhouni, the moustachioed academic with responsibility for oil and finance in the ruling National Transitional Council (NTC), at a briefing for journalists and diplomats in Tripoli on 11 October.
So far, investigators have traced about $140bn of state assets in equities, bonds and deposit accounts, and Tarhouni said there was another $30-40bn in fixed investments such as hotels, mines and agricultural projects. Libya also has some 115tn of gold reserves and about D50bn ($406bn) in its banking system.
Such an asset base would be a strong launching pad for the post-war economy and give Libya’s six million people a greater chance of economic success than their counterparts in countries such as Afghanistan and Iraq, where the domestic coffers had been thoroughly looted and foreign help was overwhelmingly military. Financially, Libya is in far better shape than its post-revolutionary neighbours Egypt and Tunisia, although its political challenges may be even greater.
Tarhouni’s next message was that the new government wanted to tackle this poverty amidst plenty with a comprehensive campaign against corruption and opacity in the oil industry which was earning Muammar Gaddafi’s regime an average of some $100bn a year. The transitional government, Tarhouni said, will set up a committee to probe corruption under the Gaddafi regime.
Ttransparency
“The committee will scrutinise all contracts and projects to provide a view of the size of the corrupt dealing and all that emerges will be investigated and published,” said Tarhouni.
International oil companies had expected such a probe, although companies from France, Britain, Kuwait, Qatar, the United Arab Emirates and the United States were hoping to benefit from their countries’ military backing for the revolution. Now some companies, both Western and Asian, are worrying that their own corrupt links to the Gaddafi clan could be exposed in this probe.
The new government wants to establish standards of accountability. In the future, Libya would publish details of all new contracts. Details of all the new government’s contracts, for fuel and other commodities, are to be published online as will the full details of government revenue and expenditures, as soon as they are set. And in another tough message from Tarhouni to the small army of briefcase-carrying oil and gas executives who have set up camp in Tripoli since the fall of Gaddafi, he added: “The transitional government should not sign any oil contracts or deals with frozen assets because this should be done by an elected government.”
At the same time Tarhouni’s deputy who is responsible for the management of the National Oil Company, Omar Shakmak, promises that companies will be freer to develop their own exploration programmes and operations without overbearing state interference. The state oil company will “evaluate” and try to “implement” oil companies’ programmes, he insisted.
Shakmak’s main task is the rapid restoration of Libya’s 1.6m barrels per day (bpd) of oil production. By mid-October, production was just 350,000 bpd, with some industry experts predicting that it could take another two to three years to restore full production.
Also eagerly awaited is the full account of more than $65bn of assets held by the Libyan Investment Authority that has been promised by its acting chief executive officer Rafik Nayed. The most problematic assets were the $5bn invested in various African projects, Nayed told The Africa Report in Tripoli (see interview overleaf).
Gaddafi’s investments in hotels, factories and farms across the continent were intended to boost his standing as a pan-African leader. No one can put a reliable figure on the total assets but the NTC spokesman in London, Guma El-Gamaty, reckons it could be as much as $40bn rather than the $5bn that Nayed has identified. These Africa funds also provided great opportunities for graft and corruption. Allegations against senior figures involved in the Libyan Jamahiriya’s Africa policy include not only personal enrichment, but also collusion in kidnap and torture. Some of the money diverted towards African projects may still be available to Gaddafi or his remaining supporters who have vowed to oust the new regime in Tripoli.
Some of it may be lost in bad investments, the rest may simply be stolen if officials cannot trace the assets.
“Countries in Africa have not implemented the freezing of assets ordered by the United Nations,” said El-Gamaty. “So some [assets] may have been sold or converted to cash which Gaddafi or his proxies may have used.”
Such African investments date back to Gaddafi’s 1998 decision to reject the Gamal Abdel Nasser-inspired Arab nationalism which had motivated his original 1969 revolution against King Idris Senussi. The failure of Gulf Arab states to resist the UN and US sanctions against Libya, and his own failure to establish a dominant role in Arab affairs provoked his switch to pan-Africanism.
On 9 September 1999, Gaddafi called for the creation of the ‘United States of Africa’ at a grandiose summit in his home town of Sirte. Much of the money that Libya has poured into the continent since then has been to develop this concept. The ‘9.9.99’ logo of Afriqiyah Airlines, established soon after this date, commemorates the vision.
Pan Africa Money
The oldest Libyan fund investing in Africa is the Libyan Arab African Investment Company (LAAICO), dating back to the mid-1970s. For the past five years LAAICO has technically been part of the Libyan African Investment Portfolio (LAIP), which was created in 2006 with a capital of $5bn at the same time as the LIA was set up.
LAIP owns Afriqiyah Airlines and the original flag carrier Libyan Airlines. Both are said to have made big losses, partly thanks to the number of free flights they were obliged to give to regime officials. LAIP also owns Libya Oil Holding Company. This took over the loss-making Tamoil Africa, which owns an extensive network of petrol stations and refineries across the continent.
Other subsidiaries include Mauritius-registered RascomStar–QAF, which was intended to develop Africa’s first satellite telecommunication project. LAIP’s mobile telephony subsidiary Lap Green Holding Company has been buying up stakes in telecoms companies in Niger, Côte d’Ivoire, Zambia, Rwanda, Uganda and South Sudan. Intelligence sources suspect the motivation was to use the networks for surveillance rather than to generate profit.
The extent to which senior regime figures used deals in Africa for personal enrichment was revealed by Anglo-Ghanaian businessman Henry Djaba. He had been hired to negotiate an investment by LAAICO in two Sheraton hotels in Nigeria. He had been introduced to LAAICO by Mohamed Treki, son of the former minister for African affairs, Ali Abdulsalam Treki.
According to Djaba, the Trekis tried to cut him out of the hotel deal and take the $12m commission for themselves. They conspired in his assault and kidnap “by Libyan military intelligence security agents at gun point”, according to his court filings. After his release, Djaba launched a case in Britain against the Libyan government and the Trekis. After the fall of Gaddafi, patron of the Trekis, this case may have added resonance – if the defendants can be located.
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