Shady business deals with foreign firms helped keep Gaddafi in power

A Libyan man shows a one dinar bill in which he the portrait of Libyan strongman Muammar Gaddafi has been cut out during an anti-government demonstration on the streets of Benghazi.

Kai Ryssdal: Score one for the president's promise that the United States is going to slowly start backing away from its lead role in the Libyan no-fly zone. A Pentagon official tells the Associated Press that all of today's flights enforcing the U.N. resolution were flown by non-American aircraft.

Away from the straight mechanics and economics of the no-fly zone, we're learning more about the business dealings that have brought billions of dollars to Muammar Gaddafi. And helped him stay in power. Eric Lichtblau had the story in The New York Times today. Eric, good to talk to you.

Eric Lichtblau: Thanks for having me.

Ryssdal: You guys get right to it in this article. You start with the Pan Am 103 bombing and Gaddafi basically shaking down foreign energy companies to help him pay the billion and a half dollar bill for that.

Lichtblau: Yeah, exactly. It's a pretty remarkable episode in 2009 that's catalogued both in State Department cables that we got through WikiLeaks and also our own interviews. And what happened was Gaddafi had a billion and a half dollars that he had agreed to pony up for his admitted liability in Lockerbie and a couple of other terrorist incidents. Then turned around and put the squeeze on a bunch of companies -- both in the U.S. and overseas -- that were working in Libya, telling them, you all are profiting from our oil, you need to cover the costs or else there will be serious, but undefined consequences.

Ryssdal: You asked around, did some reporting -- the payments were confirmed that some of these companies did pay, but no one is talking about who it was, right?

Lichtblau: Sure. No one is admitting that they made payments. Everyone is saying that, of course, we balked to this; it felt like blood money and as if we'd be paying for a horrible terrorist incident. But some people did agree to pay up. There were about 100 companies apparently that were solicited with this offer/demand and it does appear that some of them succumbed to what the State Department described as coercion.

Ryssdal: Let's frame this in historical context. This all happened because in 2004 the U.S. government decided to lift the embargo and the sanctions and begin normal trading relationships with the Gaddafi regime.

Lichtblau: Right. That's a really important point is that this is a -- at least until the bombs started falling -- this was a brand new booming economy for Western companies. A lot of companies were still very hesitant in saying, well this is Muammar Gaddafi, this is a notorious guy, do we really want to do business? But around 2007, a bunch of very important companies began at least exploring the possibility and in some cases making major, major investments in Libya for their oil market, their construction infrastructure. Caterpillar, we talk about, was on the verge of a very lucrative deal. But more often than not, these companies were being shaken down for kickbacks, bribes, billion-dollar signing bonuses. In Caterpillar's case, it was demanded that they would have to cut the Gaddafi family-controlled company into the partnership and that was essentially the way business was done. The State Department described business there as a "kleptocracy," where the Gadaffis had a stake in anything of value.

Ryssdal: Well that's the thing I want to ask you about because you quote some of these WikiLeaks cables as the State Department calling Libya a kleptocracy in 2009. And yet in May of last year, the Obama administration signs another trade deal. I mean, the White House knew this was going on and kept on going.

Lichtblau: That's true. I mean, I talked to people at the Commerce Department who talked very openly about the matchmaking, in their words, matchmaking services that they were doing for U.S. companies and Libyan companies, even amid these widespread reports -- both internally at the State Department and outside -- about the really brazen corruption. It was really an open secret that this was a pay-to-play atmosphere in Libya from the start and that Gaddafi was going to get his piece of the action.

Ryssdal: Eric Lichtblau is a reporter in the Washington bureau of the New York Times. He writes today about Muammar Gaddafi's money and where he got and what he's doing with it. Eric, thanks a lot.

Lichtblau: Thank you.

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