BBC World Service

Gaddafi’s oil revolution

Stephen Beard Apr 7, 2011
BBC World Service

Gaddafi’s oil revolution

Stephen Beard Apr 7, 2011

Bob Moon: Today, NATO and the Libyan government traded accusations
over an attack on the largest oil field in the country. This marked the first time a pumping facility was hit. Rebels also reported today that they exported their first cargo of oil
into the international market.

The conflict over the control of the Libya — and its oil wealth — dominates the headlines now. But years ago, Libya played an influential role in the development of the current oil market. And strange as it may sound today, the story’s protagonist is one Muammar Gaddafi.

Marketplace’s Stephen Beard has our report.

Muammar Gaddafi speech

Stephen Beard: Here he was last year declaring jihad against Switzerland. For years Gaddafi’s been an embarrassment to much of the Arab world. But he was a hero once. An oil pioneer. The first Arab leader to stand up to the oil companies and win a better deal for his country.

Fadhil Chalabi is a former deputy head of the oil producers’ cartel, OPEC.

Fadhil Chalabi: All what happened in OPEC took place, thanks to what Gaddafi did. Gaddafi started the whole process of change.

The Libyan leader came to power by military coup in 1969. And he resolved to end the old colonial relationship between the oil companies and Libya. Gaddafi demanded a higher price for Libyan oil and a majority share of the revenues.

David Butter is with the Economist Intelligence Unit.

David Butter: In Libya, a lot of the big oil fields were run by smaller companies, which were a bit easier to bully, if you like, from the Libyan point of view.

Occidental — then a smaller American oil company — succumbed to Gaddafi’s pressure. It gave him a higher price and a bigger share of the revenues. In return he gave Occidental greater access to Libyan oil.

Samuel Ciszuk of IHS Global Insight says this galvanized the rest of OPEC.

Samuel Ciszuk: It just demonstrated that it was possible, that he could actually go in and play these companies against each other.

The rest of OPEC followed suit. And the stranglehold of the oil majors was broken. The world woke up to the full reality of OPEC’s new found power a few years later, in October 1973.

Newscast: Good evening. The Middle East War produced developments all over the world today. The oil-producing countries of the Arab world decided to use their oil as a political weapon.

The Arab oil embargo — designed initially to punish the U.S. for its support of Israel — led to the quadrupling of oil prices. Since then, money has gushed into the oil producers coffers. But, says David Butter, not — in the case of Libya — to the benefit of the people.

Butter: The country is very under-developed. There’s a clear lack of housing, there’s none of the kind of commercial development that you see in the Gulf, which have had similar advantages to Libya.

Gaddafi is alleged to have ripped off billions in oil revenues from Libya for his own personal enrichment. And many say he’s undoubtedly ploughed millions into financing terrorism abroad.

Newscast: Good morning. It’s 8 o’clock and this is the BBC’s “Breakfast Time” program. It is now 12 hours since Britain’s worst air disaster. A disaster in which a Pan Am jumbo jet crashed…

Libya accepted responsibility for the Lockerbie bombing which 270 people. Fadhil Chalabi says oil played a crucial part in Gaddafi’s story. He says the Libyan leader was empowered, corrupted and even unhinged by the boundless revenues he helped unleash.

Chalabi: It is the oil money — the petro dollars — that made Gaddafi, the man who was liberating his oil industry, into the image of a killer. It’s the oil money.

Gaddafi, says this former OPEC chief, is the Curse of Oil personified.

In London, I’m Stephen Beard for Marketplace.

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