Exit the Colonel (17 page)

For Gaddafi, it was almost as important to convince Libyan expatriates (as foreigners) that the reform process underway was not just another subterfuge, because the regime needed the expertise and commitment of its own small, commercially savvy class to create and sustain the necessary narrative. With this in mind, in June 2003, Gaddafi appointed Shukri Ghanem, a former head of OPEC's secretariat, to the post of prime minister. This move was meant to reassure the Libyans and foreigners alike that the reform process would be handled professionally. A consummate technocrat, at home in both Libya and the West, with an eminently useful professional pedigree, Ghanem was one of the few Libyans who could have implemented the reform process.

Newly empowered, Ghanem sprang into action. One of his first announcements was the imminent privatization of more than three hundred sixty firms. This move was necessary to eliminate more than eight hundred thousand individuals from a bloated, inefficient public sector, and to encourage foreign direct investment. Ghanem's task over the coming few years was to make good on this effort. On the one hand, there was excitement within the miniscule private sector that this signaled a dismantling of Libya's state-run economy. On the other hand, dismantling Libya's state-run economy would have obvious consequences in terms of employment and sinecures for Libyan officials both living and dead (many on the private-sector rolls were phantom names whose pensions continued to be collected by others with connections).

The non-Gaddafi poster boy for Libya's reform efforts, Ghanem literally wrote the book on 1970s Libyan oil policy, entitled
The Pricing of Libyan Crude
. He had a reputation both internally and outside for being pretty much as honest as one could be in Libya. Ghanem had a substantial impact in bolstering the credibility of some reforms, from the time he was appointed Foreign Minister in 2001, to his appointment as Prime Minister, from 2004 to 2006. Within short order, one had a mixed group of “closet capitalist-reformists” (many of whom were members of the Revolutionary
Guards), bona fide businessmen, regime retreads without management skills, and recently returned Libyan émigrés, all chasing newly available agencies and foreign contracts. As a sign of the degree to which Gaddafi's latest, deepest commercial opening (
infitah
) had been internalized, in late 2005, there was a relatively large number of entrepreneurs—youth with connections—in their twenties and early thirties starting up a range of enterprises, from ISPs to marketing agencies and Western-style consulting firms. Many of them saw something of themselves in Saif Al Islam Gaddafi, a bridge between the old dinosaurs and a new, more enlightened regime—not completely free and open, but not completely closed and repressive.

For his part, Saif was starting to play his role with aplomb, reassuring everyone that reforms would continue and that Libya's economic landscape was changing for the better. In late 2004, Saif, with his clean-shaven pate, wire-rimmed glasses, and trademark broad, toothy smile, stood before one audience of about six hundred Libyan, European, and American businesspeople and diplomats and said that Libya did not need to “continue spending on the military field.” He told them that he intended to work to “create sustainable, widespread prosperity for all Libyans, not just a few.”
¹⁴

In short order, five or more US-based Libyan friendship societies and/or business councils were formed and began to compete with one another for the favor of US-based multinational corporations and de facto anointment by the US government. On the Libyan side, a somewhat analogous Libyan Businessmen's Council (LBC) was formed and headed by Mohammed Mansouri, the agent for the American company General Electric Healthcare, to channel contacts with approved foreign companies. LBC was in many cases a personal vehicle for well-connected regime apparatchiks looking to capitalize on the new opening. Former members of the LBC insisted later that they truly believed, as did many in Saif's circle, that the regime would make good on its commitments to create a robust private sector and foreign investment framework.

The dynamics of commercial reform, as it played out in public debates, was both fascinating, puzzling, and at times, highly entertaining. Many of the older commercial agents wavered between loyalty to the homeland (if not Gaddafi himself) and what they saw as the overeager, overcritical (or hypocritical) attitudes of the West, with its newfound interest in Libya. Thus,
there were well-connected (both tribally and businesswise) individuals simultaneously arguing passionately for economic reform (observing “red lines,” they would rarely say “political” reform) while supporting the regime's position against outside skeptics. There were also those visibly identified with the regime, criticizing others obviously connected with the regime for not paying sufficient deference to prospective foreign investors. Thus, at a late 2004 conference, entitled “Libya: Opportunity and Challenge,” Dr. Aref Nayed, an Islamic scholar-cum-engineer whose family held the IBM franchise, and several others publicly challenged UK Ambassador Anthony Layden after a lengthy speech lambasting Libyan progress in opening commercially to the West.
¹⁵
At the same event, Saif Al Islam Gaddafi publicly rebuked one of his men for interrupting the speech of a US oil company CEO for a piece of news he thought more important.

Many of those expatriate Libyans (perhaps one hundred) who returned to participate in the latest opening had profoundly mixed feelings. On the one hand, there certainly were opportunities to make money, all the more for those who understood how the regime worked and had expertise that the regime lacked. On the other hand, their actions could be seen to add legitimacy to a regime many of them detested and about whose conversion they were highly skeptical. A few insisted they would not have come back had the rapprochement not happened, solidifying Gaddafi's grip on power. One member of a prominent Misurata-based commercial family avowed, “We were extremely disappointed in the US acceding to Gaddafi's overtures. We fully expected this meant that we would be saddled with the Gaddafi family for another 35 years.”
¹⁶

Husni Bey, the chairman of an eponymous commercial group, had, within the span of a couple of decades, become one of, if not the most successful Libyan businessmen, creating and consolidating a mini-empire that spanned consumables, shipping, and logistics, with offices in Libya, Lebanon, Italy, and the UAE. A formidable presence, with an infectious laugh, Bey was among the most willing of Libya's protean private sector (and perhaps able, given the resources at his disposal) to do battle with the regime over key points of reform, even as many grumbled about the profits he was making.

In April 2007, Bey, representing the Libyan Businessmen's Council, participated in a televised debate, held in the context of a conference on economic reconstruction. Sitting by him were Saif Al Islam Gaddafi, Minister of Economy Tayeb Safi, Prime Minister Baghdadi Ali Mahmoudi
(Ghanem was dismissed and named head of the NOC in 2006), and Minister of Tourism Amaar Al Tayef. The government had recently published amendments to the direct investment law (the topic of this particular conference) and looked to Bey and other members of the commercial community to “help them through the sweet talk.”
¹⁷

During the conference, Mahmoudi and the other government representatives advocated private investment in underdeveloped regions, including territory west of Sabrata and an area of deep desert called Jarjar Umma in the east (Jarjar Umma, means, literally, “drag your mother around”). “The time has come for us to stop dragging our mothers around,” Bey announced, before a crowd of more than fifteen hundred. “What Libyan business wants is not the privilege of investing in the desert, but secure property rights, and legal consideration on par with government or foreign-owned businesses.” Bey then turned to Saif Al Islam, sitting in front of him in the audience, and said, “Do not be fooled—these people do not want a private sector.” For his troubles, Baghdadi had Bey kidnapped, roughed up and thrown in jail, only to find himself compelled to apologize publicly to Bey some months later.
¹⁸
Saif's reformist newspapers,
Qureyna
and
Oea
, documented the scene in a piece entitled “Libyan Businessman Husni Bey: I was kidnapped, and forced to sign a check for millions as a condition of release.”
¹⁹

Bey's observations during the conference were largely borne out, as the government immediately enacted new measures to siphon off revenues and state funds through organizations such as the Social Development Fund, the Libyan Investment Authority (Libya's main sovereign wealth fund), and the Africa Fund, among others. The regime also commenced a massive grab of both private (deeded) land and promising small to medium-sized enterprises (SMEs), even while floating publicly the idea of a multibillion dollar fund with which to compensate victims of previous land and asset grabs.
²⁰
As usual, it was far from clear, to quote Aretha Franklin, “who's zoomin' who.”

For the returned émigré or homegrown businessman, the vast majority of so-called private-sector activities were ultimately either subsidized or absorbed by the regime. In the case of Buraq Air, Gaddafi's wife Safia was said to have provided much of the start-up capital.
²¹
For many, patronage came from Saif Al Islam or one of his representatives through organizations like OneNine Petroleum or Libya Al Ghad (Libya Tomorrow).

In spite of all the shenanigans, some of the more powerful returned émigrés insisted it was possible to do clean business in Libya, so long as they steered clear of government contracts. This may have been true for
those whose operations were so small that they did not interest Gaddafi family members or key members of the Revolutionary Guard. Anyone visibly making money was susceptible to intimidation and would have to pay for their privileges.

For foreign companies, and for only a brief time, the money to be made in Libya justified all such difficulties. Bluntly put, if it had not been for oil, associated construction and power contracts, and, later, arms deals, the commercial interest in Libya would have been decidedly weak. Oil was the key resource. In 2004, Libya was ranked first among African countries and eighth in the world in proven oil reserves. It boasted 3 percent of the world total, with estimated reserves of 46.4 billion barrels of high-quality, sweet crude. Additional advantages included the low cost of production and proximity to European markets, eliminating transport costs and associated risk.

In some ways, the period of isolation had made the return to Libya more desirable for foreign interests. When it went offline, Libya had been under-explored relative to other oil-producing countries. Between 40 percent and 70 percent of the territory had been surveyed in the 1970s and 1980s using two-dimensional techniques primitive compared to those available in 2000. There was tremendous potential for bringing updated technology and methods to bear on existing production, which had fallen since previous decades.

In September 2004, the Libyan NOC announced imminent, sealed-bid auctions for exploration and production-sharing licenses (EPSAs) on a scale that had not been seen in Libya for years. EPSA IV contracts were to last for twenty-five years and specified what the winning firm needed to invest in infrastructure in order to maintain the concession. Another innovation, over direct-negotiated contracts were signing bonuses and firm-specified payouts that the NOC could use to determine a winner, in the event of identical bids, specifying what percentage of revenue went to the company and what went to the NOC (“M factor”) bids. The NOC appeared genuinely eager to demonstrate that the bidding process was completely fair and transparent. The actual auction
process
may have been, there were various ways the bids might be enhanced or manipulated at the margins—and the results seemed to suggest they were.

More than two hundred fifty firms submitted proposals in the first round. Of those, sixty-eight qualified (NOC accepted bid qualifications), and
fifty-seven submitted formal bids, in various combinations. When the results were announced on January 29, 2005, fifteen exploration blocks went to the US firms Occidental (Oxy), Amerada Hess, and Chevron Texaco and their partners. The remainder went to Indian, Canadian, Indonesian, and Australian firms. None of the major European firms won blocks.

Despite the show of transparency, many foreign analysts were absolutely certain the Libyans were favoring the Americans, alleging privately that political factors were at work in the allocation of real estate.
²²
The Libyans pointed to the public, sealed-bid auction as proof that there couldn't have been any funny business, but extremely low revenue-factor bids combined with sky-high signing bonuses accentuated suspicion that undue influence had been brought to bear.
²³
Transparency aside, it was very much in the Americans' and Libyans' interest for the Americans to be seen to be profiting handsomely from the opening. In 2005, the industry as a whole was anticipating peak oil, a sustained rise in crude prices to above $100 per barrel. The Libyans needed US technology both to discover new reserves and to extract maximum production from aging drilling infrastructure.

The argument can be made that conditions in Libya permitted US companies to bid far higher than their competitors. It would have been an entirely reasonable strategy for a US company with the appropriate know-how (particularly one with past experience in Libya and access to some of the old seismic data) to offer an “unreasonably” good price for Libyan real estate, in full expectation of the “unreasonably” good returns that only it or one of its sister firms could realize. Russian and Chinese oil and gas concerns, while aggressive in Libya at this time, could not match the technology of Occidental or ConocoPhillips. When deciding how to bid, they had to weigh the value they could extract against the prospects of future business and a foothold in Libya. Further, the information advantage with respect to new fields was arguably in the US corner: US firms had done most of the surveying of Libyan oil real estate in the 1970s and 1980s.