International Herald Tribune: Qaddafi may be rude, but he’s extremely rich

By Celestine Bohlen
Bloomberg News
Wednesday, December 26, 2007

PARIS: During a visit this month to Paris, the Libyan leader Muammar el-Qaddafi, a one-time international pariah, thumbed his nose at his French hosts, accusing them of violating women’s rights and treating African immigrants poorly.

Halfway through Qaddafi’s stay, the French president, Nicolas Sarkozy, explained why he put up with his guest’s provocative antics: business. “I am really engaged in the battle for contracts,” he said.

Sarkozy, 52, has been waging the same battle – complete with a “war room” – across North Africa, using contract diplomacy to replant the French flag in a region rich with oil, gas and cash where U.S. and British companies are increasingly making inroads.

The French leader, who has visited China and the United States since he took office in May, has turned his attention closer to home in the last two months. He paid state visits to the former French colonies of Morocco and Algeria and set out the welcome mat for Qaddafi.

“What is clear is that Sarkozy and other French officials want France to be back in the region in a very important and visible way,” says Francis Perrin, editorial manager at the Arab Petroleum Research Center, which is based in Paris.

Just weeks after Sarkozy was sworn in, a visit by Tony Blair, then the British prime minister, to Libya resulted in a $2 billion gas appraisal and exploration project for BP, the biggest of its kind for the second-largest European oil company. Occidental Petroleum, Exxon Mobil and Chevron are among the U.S. companies to win drilling rights in Libya.

One day before Qaddafi’s Paris trip began, Gazprom, the Russian natural gas monopoly, and Royal Dutch Shell, the largest European oil company, said they won Libyan exploration permits, beating Gaz de France and Total, two of the largest French energy firms.

In October, after the Moroccan government chose U.S.-made F-16 fighter jets over French-made Rafale planes, Sarkozy said he was setting up a war room at the Élysée Palace to help French companies sell their wares.

“As a good politician, Sarkozy has to show his constituents that he is bringing home the bacon,” says François Heisbourg, director of the Foundation of Strategic Studies, a Paris research institute.

The war room faces a few stark facts: France’s trade deficit in the year through September was €31 billion, or $44.5 billion, compared with Germany’s €147 billion surplus, according to Eurostat, the statistical agency based in Luxembourg.

“France cannot be absent,” says Olivier Dassault, a member of Parliament and corporate director of Dassault Aviation, which makes Rafale jets and Falcon business planes.

The Libyan visit may have made up for the disappointment in Morocco. It produced defense contracts, including a possible sale of 14 Rafale fighter jets. If concluded next summer, it would mark the first export of the plane.

Other pending contracts include the sale of 35 helicopters, 6 naval vessels and radars for anti-missile systems. Libya also agreed to buy 21 Airbus aircraft, with an option for 9 more.

That, and a preliminary accord to cooperate on nuclear power, was enough for Sarkozy to gloat about “contracts worth about €10 billion” after his first meeting with Qaddafi.

“This is announcement politics,” says Mycle Schneider, an energy consultant based in Paris. “History is full of projects that don’t materialize.”

Libya, home to the largest oil reserves in Africa, has been the region’s biggest prize ever since the United States and the United Nations lifted sanctions in 2004 after Qaddafi renounced terrorism and a nuclear-weapons program.

“That there is a bonanza in Libya is true,” Heisbourg says. “There is enormous pent-up demand, accumulated reserves and oil that is now worth $90 a barrel. They are rolling in cash, which they haven’t had the opportunity to spend in 15 years or so. Now they are going on a binge.”

Libya announced this month that it was setting aside $100 billion to buy foreign assets and $155 billion more for local projects such as housing, education and communications.

Members of Sarkozy’s own government were openly critical of the Qaddafi visit. Rama Yade, secretary for human rights in the Foreign Ministry, says France “is not a doormat on which a leader, terrorist or not, can come and clean the blood of his misdeeds off his feet.” Foreign Minister Bernard Kouchner avoided meeting the Libyans and criticized them in Parliament.

Defending Qaddafi’s five-day trip, Sarkozy said France invited the Libyan leader only after the release in July of foreign medics who were held in Libyan prisons for eight years.

“Just go to Tripoli, and you’ll see business people crawling all over the place,” Heisbourg says. “The Brits didn’t wait, neither did the Germans or the Italians.”

In both Libya and Algeria, France is proposing cooperation on nuclear power, playing a card held by Areva, the world’s largest nuclear-plant builder, which is based in Paris.

While Areva’s chief executive, Anne Lauvergeon, says it will be some time before such projects can move forward, Sarkozy presents the offer as a “bridge” to the Muslim world, signaling to countries such as Iran the benefits of renouncing nuclear-weapons programs.

Qaddafi’s visit, followed by another contract-signing trip to Spain, showed who has the upper hand.

“The Libyans’ position is very strong because they are one of the few oil-producing countries that remain open to foreign investment,” Perrin said. “That is a very strong trump card.”

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