The unrestrained jubilation in Libya following the death of Colonel Muammar Gaddafi, which ended his 42 year reign as one of the world’s most feared dictators, is not only a response to the grim conclusion of a brutal regime that curtailed democracy in the region for so many decades. For all of the human rights abuses and increasingly bizarre decisions he made, perhaps Gaddafi’s greatest failure was the way in which he squandered Libya’s monumental oil riches, only to line the pockets of his closest associates and cronies.
One of the twelve members of OPEC, Libya played a pivotal role in manufacturing the oil crisis of 1973. According to the organisation, revenues from Libya’s oil sector contribute around 95 percent of its export earnings and at least 25 percent of its GDP. Nevertheless, this sparsely populated nation of just six million people has suffered inexorably from severe inequalities facilitated by the Gaddafi regime, with approximately one third of Libyans living below the national poverty line. “Divide the trillions which the country’s oil has produced since the early 1970s by six million and everyone in Libya should be a multi-millionaire. Not so”, says the BBC’s World Affairs Editor, John Simpson, explaining the sheer absurdity of the economic situation. “Libya may not be dirt poor like Sudan or Yemen, but the comfortable capitalism of Morocco, Tunisia and Egypt is entirely missing”.
The vast amount of oil produced has disproportionately benefited the few under Gaddafi’s hand, and left the masses in disarray. A cursory glance over the despot’s personal portfolio gives us some indication of where these riches might have disappeared to. Born into a rural, poverty-stricken farming area just outside Sirte, and raised in a Bedouin tent in the desert, Gaddafi somehow amassed a personal wealth of billions of dollars. In recent years, the Gaddafi family has had more than $30 billion of assets seized or frozen in the United States, Canada, Austria, Switzerland and the UK. Some of his less hefty investments include a 7.5% share in Italian football club Juventus, a $120 million private jet (complete with Jacuzzi and cinema), and $455 million worth of property across west London. For a man who claimed to live a simple, unluxurious life, it is an astonishing collection.
Alas, history cannot be reversed and the Libyan people must look forward to a brighter future. As of January 2011, Libya has total proven reserves of 44 billion barrels of oil – by far the largest reserves in Africa. Many more reserves are said to have a legitimate founding beneath Libyan soil. However, the civil war has reduced the need for drilling and shipping equipment, whilst the legal framework for managing oil money was destroyed long ago. In spite of this, Libya is forecast to produce 2.2 million barrels of oil per day over the next decade, before a gentle decline to 1.6 million barrels per day. By 2030, the country will have produced a further 35 billion barrels – no mean feat for a country responsible for only 2% of the world’s oil production. As such, it is imperative that the new Libyan administration understands that maintaining the current balance of demand and supply is paramount when it comes to oil production.
The existence of a legitimate policy framework for the benefit and redistribution of resources to the Libyan people disintegrated long ago. Today, an uncertain cloud hangs over Libya, but the potential output of Libya’s oil reserves is yet to be reached and as such the path to prosperity is clearly there for the taking.
Moving forward, Libya should not encumber itself with economic vested interests as it has done in the past. The new administration must set up a system for oil companies to negotiate contracts for finding, retrieving and supplying oil. It is imperative that oil companies feel reassured in their terms and conditions; only then will trade flourish under the right provisions, rather than in favour of foreign interests. “It’s extraordinary how the Gaddafi regime squandered so much oil wealth and left it a deprived country in terms of infrastructure. The country will need oil revenues to recover”, says Daniel Yergin, Pulitzer Prize-winning author of a seminal history of the oil industry. Incredulous at Gadaffi’s wastefulness, Yergin is in no doubt that placing a priority on reforming the country’s oil industry is fundamental if we are to see a long overdue improvement in the standard of living of the Libyan people.
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