Gaddafi's thirsty years

Libya got an immediate grip on the European Oil market because of its geographical closeness. Also Libyan oil companies heavily discounted in competition with Middle East companies in order to break into the market. Libyan oil was sold at a premium price as Middle East costs went up owing to the long tanker haul around Africa. Furthermore, Europe was becoming pollution-conscious, and Libya's low sulfur oil was sought by all countries. By 1969 Libya was supplying Germany with 45 per cent of its requirements, Italy 28 per cent, the United Kingdom 22 per cent and France 17 per cent. But Libya remained a poor society.

Then the unexpected happened. Ridding straight out of the pages of the holy book came a fiery, young zealot to change commercialism into a cause. On September 1, 1969, Libya's ailing eighty-year old King Idris was visiting some European countries. In Tripoli, the Libyan capital, a group of young army officers gave a party for the senior officers of the King's loyal national police. At the end of the evening the army officers arrested them, proclaiming Libya a republic with twentyeight-year old colonel Muammar Gaddafi as head of state and commander-in-chief. It was a deliberate long-planned coup by a nomad's son who believed himself to be a 'sword of Islam,' destined to unite 100 million Arabs. He was an extreme Arab nationalist, a revolutionary and puritanical reformer.

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The unknown Gaddafi caught the outside world by surprise. His first moves were to close all nightclubs, bars and casinos and change all street signs from English to Arabic in Tripoli, which resembled a West Texas oil boomtown more than an Arab city. Soon he ousted the Americans and British from their air bases and expelled the 25,000 descendents of Italian colonialists still living in Libya. Gaddafi's new civilian cabinet members made vague, soothing statements that Libya would honour its oil concessions although there was no spectacular changes on petroleum production. Nevertheless, this made the oil companies and European consuming countries highly nervous.

Four months following the coup, oil Minister Ezzedin Mabruk summoned the twenty producing oil companies to a general meeting to announce that the government would start discussion with individual companies of demands for higher crude oil tax prices. Shortly after the meeting started, the oilmen were startled when Colonel Gaddafi walked into the room. He erased all doubt about the tough posture he would take in negotiations: 'people who have lived for five thousand years without petroleum are able to live without it even for scores of years in order to reach their legitimate right' he warned them sternly.

His guiding percept was: The Arabs need someone to make them weep, not someone to make them laugh. One of his first acts was to restore the practice of amputation for thievery. Simple theft meant the loss of the right hand. Armed robbery involved the additional loss of the left foot. In fact Gaddafi could do what he pleased as he had few political pressures. Libya's population was less than 2 million and 75 per cent of the people were either small farmers on the thin strip of fertile land along the Mediterranean or nomads in the vast desert. The American propaganda was that in such a situation no modern economic arguments concerning growth and development could carry any weight. Negotiations on oil tax prices had been dragging (because the foreign oil companies were virtually the boss of Libya). As a reminder to the oil companies Gaddafi shut down Esso Libya's new US$ 350 million LNG plant while a tanker was loading the initial cargo of 'frozen gas' to deliver to Italy. Someone from the oil company pointed out that the government was losing money by not selling gas. The quick answer was that the government isn't losing any money, because before the plant was built, the gas was flared in the fields and Libya didn't make any money on it then. Besides, oil ministry's Department of Economics said, 'We don't need money.' At this some one felt like Alice in wonderland when the White Queen tested her on mathematics by asking what was the answer to the problem 'divide a loaf by a knife.'

The government was negotiating separately with each of the twenty companies operating then in Libya. The charismatic leader Colonel Gaddafi delivered a dramatic public speech exhorting the Libyan people to mobilise for the 'coming fight with the oil companies.' Immediately afterwards, he clamped a huge cutback on an Occidental Petroleum Company (the Magurcharra blowout culprit in Bangladesh) oil field, which was providing almost 21 per cent of Libya's total oil output. Occidental officials protested that cutting back production would cause a permanent loss of about 55 million barrels of recoverable oil -- for the wells would be flooded with water if they were not continually produced. Libyan authorities on the other hand contended that Occidental was critically overproducing its field (as Sangu gas field in off shore Bangladesh). When Occidental tried to make up its lost production by producing more from its other fields, the government promptly slashed its total production. Occidental was forced to begin rationing its international customers.

A week later Libya nipped at the heels of the major oil companies such as Texaco and Socal. Europe was feeling a real pinch as Libyan supplies began to dry up. A month later Libya flushed another company out of the herd, jointly owned by Continental, Marathon, Shell and Amerada Hass, which was producing 31 per cent of Libya's oil. And just in case all the companies hadn't gotten the full message, the government nationalised the marketing operations of Esso, Shell and ENI with no indication when they would consider starting discussion in regard to compensation. In a five-month period the individual oil companies in Libya had tripled their tax price offers each time Gaddafi expressed dissatisfaction. It was really like being after a bigger game. That was Colonel Gaddafi in his top spirit.

The OPEC countries were jubilant at the price vistas Libya had opened for them. Venezuela, then the second largest oil exporting country, next to Iran, stunned the oil companies by raising the income tax rate to 60 per cent from a maximum of 52 per cent.

This meant that adding other taxes the government would receive 80 per cent of the profits. The OPEC resolutions passed two month's later in Caracus left no doubt that the revitalised organisation (OPEC) now knew how much muscle power it had and was determined to use it. Libya was obviously upstaging its partners in OPEC before the Tehran Conference could start. However, something more serious was in the making. Libya's new demands were intended to 'hurt' the companies to force them to put pressure on the United States to change its pro-Israeli policy. For the first time, oil prices and policy were openly being used as a political weapon.

Colonel Gaddafi's goal appeared to be achieving what Colonel Naseer (of Egypt) failed to do -- unite 100 million Arabs and destroy Israel. He was determined to devote his oil money to that end. It was rumoured that Gaddafi put his money where his mouth was. He supplied hundreds of million of dollars of aid to Egypt and Syria. He financed, and still does, the Palestinian guerrillas. He bankrolled the countries of sub-Saharan Africa. He poured millions into Uganda, Mali, Chad and Niger to get them to break with Israel. Pakistan Army got military and financial support to subjugate Bangladeshis in 1971. Gaddafi even provided safe custody to the killers of Sheikh Mujibur Rahman after August 1975.

The recent accord on the Libyan nuclear programme, though belated, is a sensible effort. It is not sure whether this new endeavour will help Gaddafi personally but this initiative would hopefully show encouraging results in the lives of the five million citizens. There is also reasons to be hopeful that Libya's oil wealth, until recently alleged to have been squandered on dubious extraneous cause, will now be available for building a better life for average Libyans.

The governments of the United States and Western European countries did not view the stand of Gaddafi as an economic matter concerning only oil companies. They took an active and public role to destroy Gaddafi and they seem to have succeeded after thirty-five years. They now look forward to buy Gaddafi a 'crutch' to allow him to walk in the desert of Libya.

Nururddin Mahmud Kamal is former Chairman of Power Development Board.