Libya May Nationalise IOC Assets Again

APS Review Oil Market Trends, Feb 23, 2009

Hundreds of thousands of Libyans gathered in villages and town on Feb. 18 for five days of debate on a proposal by their ruler Mu'ammar Qadhafi to disband the government and allow the country's oil wealth to flow straight to the people. One option Qadhafi recently mentioned was a re-nationalisation of IOC assets in the country.

The Libyans and Saddam's Iraq did that in the early 1970s and the trend of resource nationalism soon spread across the globe. By mid-1986, when crude oil prices fell to $7/b - partly a result of an oil price war against Iran's Shi'ite theocracy from Sunni Arab states led by Saudi Arabia - they had realised that the world had changed drastically. The next oil price shock, with paper WTI hitting $250-300 /b, will cause the world to be changed more drastically.

Just before the gatherings began, Qadhafi told his people: "Libyans, this is your historic opportunity to take over your oil wealth, power and full freedom. Why do you want to let the chance slip away from you?"

State radio and TV stations repeated Qadhafi's message as Libyans streamed into public places in villages, towns and cities for meetings of Libya's Basic People Congresses (LBPC). Calls by Qadhafi for Libyans to free themselves from political corruption and share out oil wealth without government meddling reverberated around the gatherings. Of course, there is a yet to be explained game behind what Qadhafi has been saying. We will soon find out.

The LBPCs are the backbone of Libya's unique "Jamahiriya" - state of organised disorganisation - as they are effectively the country's top executive and legislative bodies. They represent people at district and village levels, and vote on laws and government policy.

In practice, however, Qadhafi decides on key policies, particularly for the petroleum sector. The General People Congress (GPC), the umbrella body, is due to collect the LBPC decisions at the end of the debates and announce whether a majority backs Qadhafi's proposal, a foregone conclusion as his supporters dominate all levels of power.

On Feb. 14 Qadhafi called on Libyans to back his proposal to dismantle all the ministries. He said more than $30 bn in oil revenue should be handed out to Libyans this year.

Qadhafi's scheme has been opposed by senior officials and state-owned company executives, who stand to lose their jobs if government is purged. In November 2008 officials told him the move could do long-term damage to Libya's economy by fanning inflation and encouraging capital flight.

Qadhafi insists the only way to rid the state of what he says is entrenched and widespread corruption is to sweep away the whole government structure. He says decent people do not take up government positions because of a wide-spread belief that all officials are corrupt.

This is not to mention Qadhafi's family, with some of his sons said to be multi-millionaires, if not billionaires. Young in his family love to have "foundations" doling out millions of dollars for various causes. One of his daughters has such a foundation which recently sent a generous reward to the man who in late 2008 threw his pair of shoes at then US President George W. Bush (see ood6IrqShoesObamaBmbDec22-08); some of them like to own EU football clubs, etc.