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LIBYA


  
   

 

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Key Economic Data 
 
  2002 2001 2000 Ranking(2002)
GDP
Millions of US $ 34,137    34,136 57
  n/a     n/a
GNI per capita
 US $
Ranking is given out of 208 nations - (data from the World Bank)

Books on Libya

REPUBLICAN REFERENCE

Area (sq.km)
1,759,540

Population
5,499,074

Capital
Tripoli

Currency
Libyan dinar 

Leader 
Col Mu'amar al-Qadhafi


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Background:

The Great People's Socialist Libyan Arab Jamahiriya 
Modern Libya, the Jamahiriya, has grown as the political experiment of an idiosyncratic vision that has been more concerned with the implementation of its ideology than the construction of appropriate institutions to manage the state. So long as an adequate inflow of oil revenues could be sustained, the 'experiment' has been able to gain a degree of public tolerance, if not support, thanks largely to the dispersal of public welfare. Ultimately, the Jamahiriya's political institutions have fostered the perpetuation of a kinship based society. As tribal loyalty has supplanted civil society, the grass roots political activity that would typically be organized around business, social, or religious concerns has been suffocated. An effective repressive apparatus has ensured the eradication of civil society and effectively precluded the rise of a sustained opposition movement of any kind. 

Pariah State? 
Although Libya has earned international condemnation, President George W. Bush stopped short of including Libya in his 'Axis of Evil' paradigm pronounced during his 2002 State of The Union Address. Indeed, Libya's idiosyncratic and flamboyant leader Col. Mu'amar Qadhafi was among the first leaders to condemn the September 11th 2001 attack on the World Trade Center and the Pentagon. Yet Libya remains one of America's favorite 'Pariah States'--along with Cuba, Syria and Iran--and its leader is an icon of comedians and variety show hosts' personifications of 'nut-case' evil, bordering on the grotesque. Libyans, and those who are familiar with their country, however, might be puzzled by America's concerns over Libya. Not only is the current Libyan military capacity limited in terms of equipment, and even more so in management, but Qadhafi has been waging a campaign against political Islam since the time G. W. Bush was still prancing around as a fraternity huckster at Yale. Indeed, it might be correct to suggest that Bush and Qadhafi have been consumed by similar passions in recent years. The Libyan leader has long considered Islamists to be the greatest threat to the regime and publicly denounced them as being a disease to be eliminated, "worse than cancer or AIDS". 

Political Opposition and Economic Reform
Moreover, Qadhafi's peculiar political structure and ideology have, in fact, made it difficult for any opposition movement to sustain a successful campaign against the regime. The violent opposition that has sporadically taken place, has largely been a reaction to the ill-conceived economic reforms that have been implemented since 1986 - as oil prices fell to record lows. The reforms have failed to fulfill the intended liberalization of the economy and critically curtailed the State's distributive largesse. This has alienated the poorest elements of society that had typically been Qadhafi's most vociferous supporters. Yusuf al-Muqariyif of the National Front for the Salvation of Libya (an Opposition Group based outside Libya) has even suggested that Qadhafi has created the Islamist threat himself to gain support from Tunisia and Egypt toward the easing of international sanctions, the idea being "either me or fundamentalism". Anti-government protests, by Islamists or others, have not been ideologically motivated. Rather, these have been symptomatic of the fact that Libya's income and distributive network have relied on a single resource. The abrupt shrinking of the public sector showed the vulnerability of this policy and proved unsustainable to most Libyans, who had become accustomed to a high standard of living. Oil revenues have made it possible for Libya to experience a significant political, social and economic transformation since independence and especially since 1969.
The regime that was established as a result of the 1969 revolution has made great efforts to distribute the wealth accumulated from oil production among the population through public services and subsidies for a variety of consumer products. It has promoted large scale, if somewhat misguided, development projects in infrastructure, education and ISI industry. The Great Man Made River (GMMR) designed to facilitate irrigation for agricultural production along the Libyan coastline via an artificial 4000 km river based on Sahara groundwater is a multi-billion dollar monument to Libya's material infrastructure since independence, the result of an extensive program of welfare spending. Radical egalitarian principles based on Qadhafi's Green Book since 1978 improved the material living conditions of the vast majority of Libyans as enterprises were nationalized and housing rental payments were outlawed.
However, the combination of a 50 % drop in oil revenues in the mid-1980's that created a current account deficit have hurt the State's distributive capacity. While the economy's nationalization process continued, the State responded by applying austerity measures and limiting imports of consumer goods. Libyan consumers, who had become accustomed to the availability of a wide range of consumer goods, reacted badly to the austerity measures, sometimes venting their anger through popular protest and by damaging and burning government supermarkets. The depth of the economic crisis was such that the foreign labor force had to be reduced. Typically, the expulsion of Egyptians and, in particular, Palestinians that was masked in political rhetoric over the Arab-Israeli peace process, has more often than not resulted from economic difficulty. This made it necessary to curtail spending and adopt a measure of economic reforms to stimulate greater private sector involvement in the economy. The reforms effectively served to retract the distributive network of subsidies and state employment that had provided the Government's principal source of support from the population. 
Therefore, for a majority of Libyans, the 'reforms' have only contributed to deteriorating standards of living. The failure of these reforms has highlighted the institutional shortcomings of the regime that enacted them and promoted increasing opposition to it that the Libyan government has often blamed on what it has called Islamic 'radicals'.

Political Structure and Risk
The General People's Congress (GPC), a body similar to a parliament in the Jamahiriya, also served as a forum of public discontent over the austerity programs. In an unprecedented move, the regime responded to the criticism with a series of policies designed to address the grievances which was adopted in 1988 at the yearly session of the GPC. It provided the framework of a more liberalized economy, curbed the authoritative excesses of the Revolutionary Committees (RC) and assumed the title of Great Green Charter of Human Rights in the Age of the Jamahiriya. Despite this lofty title, the institutional infrastructure of the Jamahiriya failed to implement the Charter in a manner worthy of its name. The Libyan economy has lacked the necessary institutional infrastructure and administration in order to function properly. The mere elimination of state dirigisme, as occurred in Libya, has not sufficed to generate alternative sources of economic growth. 
Free trade and the removal of price subsidies, coupled with international sanctions from 1992 to 2000 caused price inflation for most consumer goods while average wages remained stagnant. The only beneficiaries of the economic reforms were the private merchants who controlled the import and the sale of various types of merchandise. Meanwhile, worker cooperatives known as tasharrukiyyat entailed a form of privatization that was adapted as best as possible to the Green Book's economic ideology. These allow for the sale of state production assets to one or more individuals, who agree to share equally in the management and profits of their enterprise. By and large this system has not enjoyed much success beyond the small service sector in such areas as appliance or automobile repair, hairdressing shops and photography laboratories where ownership is usually limited to single individuals. In these types of activities earnings are higher but thus far privatization has not resulted in a significant diversification of the economy. Property rights have not been guaranteed and neither has privatization been officially sanctioned in law. In the end it has been far harder to create the necessary regulatory framework to support national markets. This requires financial, legal, and civil institutions in order to provide a free exchange of information and enforce contracts. Another very significant problem is the abnormal lack of any reliable statistical information concerning economic indicators or demographics and it is often necessary to 'play by ear'' in order to 'read' the country's economic performance.
Nevertheless, the end of the UN embargo, which had been enforced since 1992, and increased oil demand have helped increase revenues. Reportedly, GDP has risen steadily since 1995 from 7.8 to 12.6 US$ billion in 1999 while consumer inflation has dropped from the estimated 30-35 % that persisted throughout most of the past decade to 12 %, while in 2000 it is rumored that there was a current account surplus of US$ 1.3 billion. Not surprisingly, domestic opposition to the regime, even in the economically depressed Benghazi region, has been limited since 1998 because of the improved economy. Most Libyans have been able to continue enjoying relatively high material living standards. As promising as the situation appears, the Libyan economy under the Jamahiriya has not made significant progress and has grown ever more dependent on oil exports and strong external demand for its product. The fickleness of world oil markets mean that when they're low and there is a threat of an economic crisis, the regime is not institutionally prepared to manage it, raising the prospect of political instability. 
A more significant political risk than even the price of oil is posed by Libya's tribal structure. More than ceding to an Islamist or secular opposition, in the event of collapse of the current leadership, the country would fracture along tribal lines. There has already been direct evidence of opposition motivated by tribal interests and it partly explains the Libyan leadership's foot-dragging over the Lockerbie incident. Indeed, the Warfalla tribe organized one of the most significant coup attempts of the past decade in October 1993. The tribe is well represented in the regime as one of its members is Major Jalud, an original member of the Revolutionary command Council (RCC) that led the 1st September, 1969 coup, which brought Colonel Qadhafi to power. The coup was a response to the regime's considering handing over the suspects implicated in the bombing of the Pan Am B-747 over Lockerbie, Scotland in 1988 to normalize relations with the West. One of the suspects was a member of the Warfalla tribe and Jalud opposed any normalization plans on that basis. 
Islamist politics in Libya, contrary to Egypt or Tunisia, have not developed successfully. Qadhafi has never provided the opportunity for Islamists to carry out any measure of political discourse as its neighbors have by way of elections and official representation. However, Qadhafi's speeches in the period between 1989 and 1993 when economic hardships were hardest, and violent confrontations between citizens and security forces more frequent, indicated his fear of Islamists operating in Libya. In addition; in April 1993, Qadhafi reversed his unorthodox position and presented himself as a defender of Islamic law. He encouraged the adoption of traditional Islamic punishments for murder, theft and fornication. Alcohol consumption, which had been tolerated in the 1980's, was again condemned. In many ways he adopted the defining elements of what he thought was the Islamists' agenda. Qadhafi's Islamic revival, nonetheless, precluded removing the Green Book as the de-facto constitution of the Jamahiriya. 
Libya's unique political system has been envisaged to function according to the precepts of the Green Book. The system has ideally been intended to function as a direct democracy and to guarantee economic and social equality. However, while a measure of economic equality has existed in Qadhafi's Libya, its political system has perpetuated a kinship based social organization and impeded the political development of the population. These combined characteristics have served to hamper the rise of an effective and united opposition. Essentially, direct "democracy" in Libya works through a peculiar infrastructure that involves grass roots discussion and approval of the general ideas pertaining to policy, defined and made plain by Qadhafi, in a manner that resembles more a consultative than a legislative body. Ultimately, the informational and organizational vacuum that exists in Libya has precluded the necessary degree of coordinated action capable of sustaining a real threat to the regime. 
Libyan citizens are fearful and apprehensive and the Revolutionary Committees have had a de-facto mandate to keep them this way! Libyan society has remained fragmented since the Revolution as exclusion from political activity and the official repression of civil society has promoted kinship as the primary mechanism of social organization. There has been little political evolution among the population and therefore little popularity for more radical alternatives to Qadhafi himself.
Officially, Qadhafi himself does not hold any political office and he is simply referred to as the Brother Leader of the Revolution Akh al-Qa'id al-Thawra and, most recently, as the Philosopher of the Revolution. However, his role is in fact one of supreme authority which he exercises through the Revolutionary Committees. These in fact 'bring' Qadhafi's ideas to the Basic Congresses and Committees for approval, while taking back valuable information on the people's perceptions of certain policies, that are sometimes reversed if these are perceived to threaten wide scale, politically dangerous opposition. While there is no formal Constitution as such, the dictates of the Green Book serve a similar purpose. The Green Book promotes many of the themes common to Arab Nationalism and contemporary Islamic thought such as anti--imperialism, and dependence on the West, social injustice and exploitation and advocates a return to Islam to restore Arab/Muslim power.
Kinship based social organization principles have persisted in Libya as a result of the official encouragement of tribe and family and the prohibition of alternative organizational principles. Economically, the Green Book's "Partners not Wage-Workers" (la-hujara', sharika !) slogan is one of the ideological pillars of the Jamahiriya. The egalitarian ideal of this principle is to prevent labor exploitation but has served to forbid capitalist development in real estate, commercial enterprise or industry. Consequently, enterprises have been limited to small size and family ownership where self -sufficiency has been the guiding principle. No one may obtain more than the property to satisfy basic needs. Really, only the Revolutionary Committees, staffed by officers from Qadhafi's six main sub-tribes retain any real authority and they are the only group that resembles a political party. This is what some observers have referred to as the basis of the Jamahiriya's present 'stateless' society. In fact, however, 'stateless society' meant that those who argued for long term social investment, prudent administration, reduced military spending and greater efficiency were kept at bay.
This tendency is fully confirmed by the fact that a constitutional reform in March 2000 has abolished twelve General People's Secretariats (GPS), the equivalent of ministries in more conventional governmental structures, including the very important GPS for Oil. Analysts have interpreted this move as an attempt by Qadhafi to further de-centralize power to the provinces where the Colonel's extended family members wield important posts in the army and provincial government. The concept of a formal head of state has also been revised in favor of designating an official leader. Initial analysis of the significance of this latest political transformation suggests that there has been a concerted effort to diminish the influence of the technocrats, who were instrumental in negotiating the termination of the UN embargo in 1999, in favor of the ideologues of the revolutionary cadres. Certainly this is in accordance with the pattern of power distribution that has prevailed in Libya since the al-Fatah revolution.
Similarly, educational institutions have also suffered from ideological infiltration; in fact the universities became the largest recruiting ground for the Revolutionary Committees as these stressed the teaching of Arabism at the expense of more pragmatic issues such as the management of an oil economy. The weakness of the educational system has not simply been a matter of odd curricula that, until recently, allowed for such ideological intrusion as the imposition of such courses such as 'Econometrics according to the Green Book' at Tripoli's al-Fatah University. There is also the matter of the difficulty that Libyan students have faced in studying abroad because of their country's international perception as a Pariah state making it difficult for them to keep up to date with global technical and scientific developments.

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Update No: 009 - (27/07/04)

Do Old Habits Die Hard?
The alleged plot to kill the Saudi Crown Prince Abdullah by the Libyan leader Col. Qadhafi from last month has not subsided. If true, the matter could potentially create significant setbacks in US-Libyan relations. The story is playing into the hands of Washington's neo-conservative establishment, who still consider Libya a terrorist sponsoring nation despite the fact that Libya has enjoyed closer ties to Washington resulting in the establishment of full diplomatic relations. The story rests on confessions made by two supposed conspirators detained in Alexandria, Virginia and in Saudi Arabia itself. It was already suggested in the last update that the story reflects long held animosities between the ruling Al-Saud family and the Libyan revolutionary leader and a perception that US oil companies have been very keen to take advantage of the recent rapprochement between Tripoli and Washington. Should the story be true, it will potentially cost US and Western oil companies millions of dollars if Shell, Occidental, Amerada-Hess and Conoco, which have already signed exploration and concession deals in Libya will be forced to abandon Libya once again as it happened in 1986. With its focus on combating international terrorism the Bush administration would be pressured to retract on many of Libya's recently won diplomatic and, as a result, economic concessions since the launching of reforms by Prime Minister Shukry Ghanem exactly a year ago in July of 2003.

The alleged Saudi Crown Prince murder plot has therefore created an additional and significant risk factor for companies such as Texaco, who have initiated talks with Libya's National Oil Company (NOC) to gain concessions of exploration rights in July. Meanwhile, Libya needs new exploration as its traditional sources of oil are not as productive and the economy itself still overwhelmingly relies on revenues from oil production. Claims of the plot were made by Abrurahman Almoudi, an American citizen arrested in October for violating a US ban on travel to Libya, and Colonel Mohamed Ismael, a Libyan intelligence officer captured by Egyptian police in November after he had returned from Saudi Arabia where he tried to pay four Saudi militants. Col. Ismael was sent back to Saudi Arabia for questioning - under torture. In separate statements, both suspected conspirators confessed to be part of a Qaddafi-commissioned plot to murder the Saudi Crown Prince, who is the de-facto Saudi ruler on behalf of King Fahd, who has long been incapacitated by ill health. Saif-ul-Islam Qadhafi, the Libyan leader's son, who is likely to take over from his father - as suggested by the extensive role he's played in restoring Libya relations with the rest of the world recently - has vehemently denied the allegations. Col. Qadhafi has long accused Saudi Arabia of being too reliant on American protection. Saudi Arabia was also very weary of the revolutionary and socialistic tendencies of Qadhafi's Libya. . It is interesting that the plot story's timing almost coincides with the release of 9/11 Commission Report. The Report argues for an overhaul of US intelligence. It is important for the US intelligence community to get the facts on the Saud-Qadhafi row, as this story could prove embarrassing to President George Bush, who has used the Qadhafi 'turnaround' as evidence of the Iraq war's potential to change the nature of 'rogue' or 'pariah' states. The story itself has been circulated by the New York Times, which has suffered a series of setbacks due to proven cases of exaggerated or faulty reporting. The New York Times said that the two people involved were plotting to fire rockets at a motorcade of Crown Prince Abdullah bin Abdul Aziz. A senior Bush administration official was quoted as saying that should the investigation currently underway by US, Saudi and British officials reveal that Qadhafi ordered or condoned the assassination attempt - as well as the recent terror campaign in Saudi Arabia - it could cause a "180 degree" change of American policy toward Libya. The Saudi press has tried to link Al-Qaida to the plotters hinting that there may even be ties between the Libyan leader and the infamous organization. It is worthwhile remembering, nonetheless, that Col. Qadhafi and the Al-Saud family have a long history of confrontation. The latest bout between the Crown Prince and The Colonel occurred at An Arab League summit in 2003, when the two 'rivals' traded insults. It seems the Colonel had the last word on that occasion, when he used less than kind words to describe the Saudis sycophantic stance vis--vis the United States.
The controversy has been notably strong as far as reporting on the Middle East and the Arab world is concerned and especially around Judith Miller, the New York Times Journalist who strongly advocated US intervention in Iraq on the basis of the, now discredited, intelligence purporting Iraq to be an immediate source of danger to the Unites States. State Department representative Richard Boucher revealed that Washington has been addressing reports of Libyan contacts with Saudi dissidents, who have threatened violence against the Saudi royal family. Should the Saudi plot story be true, the United States government might once again forbid American oil companies from doing business in Libya. Since April of 2004, when US sanctions had been effectively removed, US oil executives have paid important visits to Abdullah Salem El-Badri, the NOC Chairman. NOC handles all contracts in the energy sector awarded to foreign companies. The first and most among them was Ray Irani, CEO of Occidental Petroleum, who came to Tripoli at the end of May to meet El-Badri, Libyan leader Colonel Muammar Gaddafi and other top officials. Occidental has already appointed a senior executive to run its Libyan operations and Libya is very enthusiastic about Occidental's return. 

As it was in the 1960s and 1970s, Libya could well regain its role of being a major source of energy for the US. The Saudi plot allegations add some risk but oil analysts suggest that the risk may be worth taking. At their peak in 1970, Libyan fields operated by Oxy produced 660,000 bpd, more than the company's total oil production last year. For Libya, whose NOC has used those same fields to extract less than 100,000 bpd, the advantages of good relations with the US are also evident. Indeed, the Libyan Prime Minister Shukry Ghanem, a former OPEC official, has admitted that Libya's oil industry is in dire need of new investment, which is widely believed to be the main reason Qadhafi took steps to cease tensions with the United States. As has been reported here on numerous occasions, the US also needs to cultivate the image of a reformed Libya. Libyan oil is geologically superior to that of the Gulf and it requires half the transport time. American oil executives are also being followed by major US law firms such as White & Case, Vinson & Elkins, and Baker Botts, which have all sent partners to Tripoli. In July, Chevron-Texaco has sent a team of executives to Libya while El-Badri also expects ExxonMobil to follow shortly. Oil analysts believe that Irani and the other American executives are hoping to negotiate new deals, rather than those that existed prior to the 1986 departure, that will let their companies enjoy more favorable terms, which focus on developing new fields. During the period of American absence, European companies have been exploring new fields and Repsol of Spain has notably made significant and usable discoveries in the Sebha area, about 800 km south of Tripoli. One of the more important new sites being explored is the El-Sharara field in the heart of the Sahara. It is operated by Spain's Repsol, which, along with France's Total, and OMV of Austria, controls 25 % of production. Libya's National Oil owns the rest. The field was discovered in 1995-96 and since then the oilfield has been pumping at a profitable 200,000 bpd. The nearby Elephant field operated by Italy's ENI and Libya's National Oil should generate another 150,000 a day by 2007. 
It is therefore clear why American executives such as Ray Irani are paying Libya such attention. There is an expectation of strong returns and despite the risks, - not only political but also administrative and contractual - people like Irani have indicated a willingness to continue to pursue negotiations for oil production and exploration contracts in Libya. The Saudi Crown Prince murder plot could yet prove a difficult obstacle. Washington is not likely to support US companies spending billions in Libya if it is proven that Col. Qadhafi has returned to his 'old ways'. Nevertheless, the story of the plot remains doubtful, at least if common logic is considered. Why would Col. Qadhafi, who has recently declined his ambitions for Pan-Arab and Pan-African unity choosing instead to pursue ties to the West, ruin all the hard work made in years of careful diplomatic maneuverings from the Lockerbie trial in 1999 to the December 2003 WMD announcement? As explained in the background article on Libya, Qadhafi's political survival is based on oil. Libya desperately needs more oil exploration and a new oil infrastructure, while it also plans to increase its oil output by 50,000 bpd to 1.7 mm bpd from late July or early August. It seems unreasonable at the very least, that Libya would want to jeopardize relations with the West over a failed - and yet unproven - attempt to murder the Saudi Crown prince. Nevertheless, the story will continue to cast a shadow over the future of US-Libyan relations in the next few months. The question remains as to how much risk American oil companies are willing to take in pursuing business in Libya. 

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