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MENAFN - Arab News - 31/07/2011

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(MENAFN - Arab News) Geo-strategic considerations, arm twisting, long-term objectives and behind-the-door haggling continue to impact the global energy chess board, as national interests, political and strategic priorities and considerations of major stake holders in the ongoing, West-led, get-Qaddafi campaign in Libya unravels, the tight global energy balance is getting under pressure - at least in the short term.

Much seems at stake. Last Tuesday, Venezuelan Oil Minister Rafael Ramirez underlined, "above all because we cannot give a blank check to NATO so that it can bomb any nation over oil.

"We are not going to do that; Venezuela will not do that," Ramirez said.

This is a tough position - bringing politics back into the fore on the energy front too. Venezuela has been siding with Muammar Qaddafi in the conflict, contending that the true aim of the NATO campaign is to gain control of Libya's oil.

Ramirez's prescription for taking the bull out of crude markets was clear: "Well, stop the bombings against Libya, stop the aggression against Iran."

He underlined, "the industrialized countries, the most aggressive ones, the United States, incite destabilization" in oil-producing countries.

"It's aggression against OPEC," Ramirez said. Often regarded as a hawk in OPEC he also spoke of the pressure on producers'.

However, it is interesting to note that despite long-standing tensions between Chavez and the US government, the United States remains the top buyer of Venezuelan oil. And in the meantime, two days after the blitz against the western interests, on Thursday to be exact, President Hugo Chavez announced that Venezuela's state oil company will boost its crude output by 30,000 barrels a day beginning Thursday in honor of his 57th birthday. The state oil company has set a goal of producing 4.15 million barrels of crude a day in 2015.

And while the battle for the ultimate 'prize' continues in and around Brega and Tripoli, US diplomatic cables released by WikiLeaks throw light on the real reasons behind NATO's campaign against Libya.

Far from initiating a "humanitarian" intervention to protect civilians against Muammar Qaddafi's government, Washington backed the NATO intervention for one reason only - the installation of a regime that better serves the strategic interests of the US, as well as its oil majors - often described as the new tool of imperial hegemony, the cables indicate.

The cables also refer to Libya's "hydrocarbon producing potential" and the "high expectations" among international oil companies. According to a September 2009 cable, then acting head of Libya's National Oil Corporation (NOC), Ali Sugheir, told the US Embassy that major "sedimentary basins with oil and gas resources had been discovered in Libya," with seismic data indicating "much more remained to be discovered across the country."

The scramble by dozens of international oil and gas companies to cash in on the lifting of sanctions, however, soon produced the problems, in the words of a November 2007 cable, of the "Libyan resource nationalism" - policies designed to increase the Libyan government's "control over and share of revenue from hydrocarbon resources."

Qaddafi's policy forced oil majors to renegotiate their contracts under the latest iteration of Libya's Exploration and Productions Sharing Agreement (EPSA IV). Between 2007 and 2008, major companies such as ExxonMobil, Petro-Canada, Repsol (Spain), Total (France), ENI (Italy), and Occidental (US) were compelled to sign new deals-on significantly less favorable terms than they had previously enjoyed-and were collectively made to pay 5.4 billion in upfront "bonus" payments.

A June 2008 cable says that the Oasis Group - including US firms ConocoPhillips, Marathon and Hess - was reportedly "next on the block," despite having already paid 1.8 billion in 2005. The cable questions whether Libya could be trusted to honor the new EPSA IV contracts, or would again "seek a larger cut."

Tension was definitely brewing!

Oil giants and the US government were alarmed by threats Qaddafi made, in a January 2009 video-conference to Georgetown University students, to nationalize the oil and gas industry. A January 2010 cable recounts that "regime rhetoric in early 2009 involving the possible nationalization of the oil sector ... has brought the issue back to the fore."

Qaddafi also attempted to force the international oil companies (IOCs) to contribute to the US-Libya Claims Compensation Agreement. Signed in August 2008, the agreement established a fund for victims of bombings involving the two countries.

A February 2009 cables report that Libya presented the oil companies with an ultimatum: Contribute to the fund or "suffer serious consequences." The US ambassador warned that "putting pressure on US companies 'crossed a red line'."

The second unwelcome consequence of the lifting of sanctions was that it enabled Libya to develop closer relations with US rivals, notably in Europe, China and Russia. A June 2008 cable describes a "recent surge of interest in Libya on the part of non-Western IOCs (particularly from Japan, Russia and China), who have won the bulk of concessions in the NOC's recent acreage bid rounds."

Several cables point to closer Libyan relations with Russia. In April 2008, Russian President Vladimir Putin reportedly flew into Libya, accompanied by 400 assistants, journalists and executives, to secure an "agreement to swap Libya's 4.5 billion Soviet-era debt to Russia" for "a large railroad contract and several future contracts in housing construction and electricity development." Several memorandums of understanding were signed with Russian energy giant Gazprom.

Most significantly from a US strategic perspective, Qaddafi apparently "voiced his satisfaction that Russia's increased strength can serve as a necessary counterbalance to US power, echoing the Libyan leader's frequent support for a more multi-polar international system."

In this context, the US cultivated relations with certain figures in Qaddafi's regime, and secretly discussed the benefits of Qaddafi's removal from the scene. A July 2008 cable relates how Ibrahim El-Meyet, a "close friend" of Ghanem (and a source to "strictly protect") told the US Embassy that he and Ghanem "concluded that there will be no real economic or political reform in Libya until Qaddafi passes from the political scene," and this "will not occur while Qaddafi is alive."

Interestingly when the then Libyan Foreign Minister Musa Kusa met Gen. William Ward in May 2009, he reminded the general that he "shared his views frequently and openly with his US contacts in the Central Intelligence Agency (CIA) and the Department of State." Kusa fled Libya to England by private jet on March 30 this year.

Behind the scenes, tensions increased with the advent of the Obama administration. The Obama administration activated preparations, stretching back to at least 2007, to seek to oust the regime and install one more closely aligned to American interests.

Indeed energy resources are proving to be a curse to its holders, this time for Libya. As is said, all is fair in love and war.


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