Libya - No more headlines

Muhammar Qaddafi is encircled and under siege in Sirte and is now calling for one of the always possible scenarios to be implemented – guerilla war.    Effecting this scenario may well be problematic as it is unlikely he will escape the coming assault on Sirte.  The regime is dead – an internal revolution succeeded but only with the help of foreign intervention.  That’s important to remember, because otherwise this would have been a long and likely losing struggle.  Qadaffi has been in control for over 40 years and didn’t keep his power by being stupid or reluctance to do whatever was necessary to retain power.

Now that the fighting has narrowed to small pockets of resistance by Qaddafi loyalists, questions can be raised that have previously been dismissed.

Consider this.

Libya has nearly 45 billion barrels of oil reserves, 3.4 percent of the world’s known supply. Natural gas reserves are estimated at near 55 trillion cubic feet.

Most of Libya’s oil exports went to Italy – 32 percent of foreign sales as of 2009. The majority of the rest went to Germany, France, Spain and China (no veto of the no-fly zone imposition).

All existing contract will remain active, begging the question of the extent of modifications.  Who will get the new exploration and extraction licenses? ENI (Italy) or Total (France).

Will the existing contracts be modified from their current 90/10 revenue split between Libya and the companies? Tipping the balance is expensive.

How is it that a listed terrorist organization gets to be a freedom fighter group and whose head commands the Tripoli Military Council?  Change of name – change of status.

The Arab Spring, of which Libya was made a part, has been astonishingly lucrative. For weapons sales.

In the five months ending in June, the UK sold arms to Arab governments amounting to 30.5 million sterling, according the The Times – a 30% increase.  Germany, that bastion of peace which refused to take part in the naval blockade of Libya, nevertheless inked a contract with the Saudi’s (whose military crushed the Bahrain demonstrations by Shiites) for a division’s worth of high end tanks tagged at 1.5 billion euro only to be heavily trumped by the US - $60 billion of aircraft to Saudi Arabia over a 20 year period. This is only in the Arab Spring period – care to guess about the past ten years?

There is nothing wrong with disposing of people like Qadaffi and I support it.  But the media, as usual, has played the useful idiot and parrots the talking points of the protagonists while studiously avoiding the hypocrisy.  This is not a judgment.  It is important to make sure that events are not seen in isolation from other, important factors nor should decisions to act or not be viewed in black and white even if the short attention span or relative ignorance of populations demand simplistic analysis.

Khartoum and South Sudan - War?

I have to admit I was surprised by the relative peaceful separation between North and South Sudan.  South Sudan officially begins its history as a new country in July and my earlier fears that this would be the “surprise war” of the year seemed unjustified (I am happy to say).  That may be changing.

The BBC reported yesterday that the Northern Sudanese army had seized the valuable Abyei region claimed by South Sudan, allegedly in response to an attack.  Let’s be clear what this is about. Oil.  The Abyei area is where the oil is located for what was once Sudan.  Taking the disputed territory prior to the official date of independence is an attempt to impose a fait accomplis.  The river forming the southern border of Abyei is the northern demarcation line – but Khartoum is likely looking for an excuse to cross over and take the entire oil producing region.  The conflict could escalate rapidly, particularly if the South Kordofan state decides it has had enough of Sharia law and the imposition of Arab culture on what is an African area. 

And this is the crux of the matter next to the oil.  The war between the south and the north has been going on since the late 1970s or earlier.  It is one of an Arab, Islamic system trying to destroy the African culture.  In the south they are black, in the north they are not.  This is an ancient clash beginning with the Muslim conquests of North Africa in the 8^th century and although its manifestations have modulated historically, that too may change as the 10,000 or so troops making up part of the South Sudan army come from South Kordofan.  President Bashir needs to moderate his views. 

The only real solution – at least with the current attitudes and government resident in Khartoum – is another split.  Otherwise, the cost in blood in Darfur will look like a minor disturbance compared to what is to come.  The West is clearly involved in both Sudan and South Sudan as is China, whose involvement in the oil regions is their primary concern. President Bashir has been indicted by the ICC and an arrest warrant remains outstanding.  Like Gadhafi, if he sees his grip on another region of Sudan loosen, his reaction and actions will be very unpleasant. 

A remote possibility exists that the Arab population in Sudan will have had enough of Bashir – but unlike the Egyptian army, any “Arab Spring” in Khartoum will be bloody.  And despite the handwringing sure to follow, removal of the current regime and its system of law may be the necessary future of Sudan.

China Missteps

Image via Wikipedia

China’s foreign policy has been increasingly annoying to its neighbors over the past year or so and this year seems no different. In a report by AP, Chinese vessels made threatening maneuvers indicating an intention to ram a Philippine oil research ship near the Spratly Islands. Aside from the fact that ramming – as it has done against Japanese ships, seems to be an approved form of attack by China this area is Philippine territory, although also partially or wholly claimed by Vietnam, Brunei and China. It is also a vital shipping lane which the US considers in its national interests to maintain open – something China dislikes intensely since it claims sovereignty over the entire South China Sea.


The continuation of this sort of aggressive, bullying behavior is not a good sign and juxtaposed with the recent announcement by Beijing to increase its military budget by more than 12% tends to alarm its neighbors. Although tiny in comparison to the US military budget, the Chinese government attitude that, in the region, what’s theirs is theirs and what is anyone else’s is negotiable is not only counterproductive and against the ultimate interests of China, but could lead to an unfortunate and unnecessary confrontation.

It is difficult at the best of times to discern Chinese foreign policy intentions. The continuation of this type of bullying behavior would lead its neighbors – not to mention the US – to take the worst case view and do what is necessary to counter the actions. Of course, the behavior benefits the US as Japan and the South East Asian countries will want a strong US naval presence to remain, if not beefed up.

Embarrassed in Libya

Image via Wikipedia

Reports on al Jazeera say that 8 S.A.S. were captured by rebel forces near Bengazi. Amid a ‘no-comment’ by the UK foreign ministry was an admission that there was a diplomatic group in the area trying to make contact with the rebels.


OK. Well. Aside from the perception that this constitutes foreign interference – after all the S.A.S. are elite special forces – this would be a terrible embarrassment for the S.A.S. On the one hand, it is good that the UK is trying reach out; on the other, sending in S.A.S. without some sort of advance ground work might not have been the best idea. It’ll all probably work out for the best as it unfolds.

In other news out of Libya, the rebel troops have taken Ras Lanuf and its oil refinery. That refinery accounts for 60% of oil exports. That’s a blow to the Qaddafi. Sirte – Qaddafi’s birthplace – is the next target. If Qaddafi loses Sirte, that may be the tipping point on the military front and, if the rebels form a government, the West will need to make a hard decision – recognize or not. Not that anyone listens to me, but I would recommend a race to the microphone to announce recognition of the new government.

A word about the flag - it's the first flag of independence in 1951 and is the one you see the rebels waving on TV.

Southern Sudan

The hard work now begins in Southern Sudan.  Almost 99% have voted for independence from Khartoum. In July, the world will inaugurate a new country but in the meantime the oil resources and transit agreements will need to be negotiated and that will not be easy.

An interesting note to all this is that demonstrations have been reported in Khartoum using Tunisia and Egypt as their inspiration, but have been controlled by the government. So far.

South Sudan - So Far So Partly Good

Back at the end of September I posted that the world was not paying attention to what could turn into a vicious bloodbath starting this week. I was writing in reference to Sudan and the vote for or against secession in the south. So far I am glad to have been proved wrong and President Bashir has said that he will respect the results of the vote, now in its second day out of six. He also offered to assume all of Sudan’s debt after the referendum if the south secedes, saying that it would be unable to handle any debt in its current economic condition.


As everyone now knows, the violence in Sudan between the Muslim north and Christian south (and, more to the point, the racial differences between the north and south) has been going on for decades. The problem in the Darfur has been covered only recently. Fighting goes a long – a long way back and had only marginally to do with what has caught the attention of the media now – oil.

Although thankfully major violence appears to have been avoided at this point in time, it remains a serious and dangerous possibility. Reuters reported yesterday that 36 have died in clashes around the likely new border and claims that Khartoum is supplying arms to Arab Misseriya militias in the Abyei region – where the oil is.

The oil producing regions in the south do just that – produce. Khartoum control, because it has the infrastructure, refining and export. Agreements will need to be signed upon independence (and there is no question the south will become independent) that restructure the revenue sharing. Although so far the fighting has been somewhat confined, I don’t see a peaceful ending to this as a given and some sort of international intervention may be required.

Expect the Chinese to be a major player in the negotiations and outcome.

Kurdish Independence

Image via Wikipedia

What would happen if Iraq lost the Kurdish north? The region is already largely autonomous and is a major center of oil reserves. The conventional wisdom is that independence for “Kurdistan” would prompt a military response, sooner or later, from its neighbors – Iran and Turkey. But would it really?


Iran has its hands full with a poor economy, a hostile neighbor – Saudi Arabia – and an unstable Iraq which is proving harder for Iran to manipulate than it expected. It also has larger issues of concern such as a military attack by you-know-who. So, although there is a longstanding conflict that flares now and again between Kurdish nationalists in the northwest of the country and Tehran, it is exceedingly unlikely that Iran would invade northern Iraq if it became independent.

The question is really, what would Ankara do? I suspect that Ankara might welcome an independent Kurdish Republic for several reasons. First, the Kurds in northern Iraq are not actively hostile to Turkey. The PKK is not welcome as a strong presence and indeed is quite worrisome since any cross border attack against Turkish troops has the tendency to provoke a rapid, overwhelming response from Turkey.

An independent Kurdistan might actually gut the PKK movement – much like the establishment of a Palestinian state would seriously undermine Hamas and Hezbollah. Turkey would benefit in its poorest region, the southeast, and tensions would be reduced. Then, there is the oil. Turkey relies heavily on Russian energy supplies for its growing economy. An alternative source would be a welcome event for Turkish foreign policy advisors and would also allow Turkey to increase its influence south and east at the expense of Iran.

Unlikely as it may seem, an independent Kurdish state would not result in an upheaval. However, it is equally unlikely that Baghdad would appreciate the independence of a key part of the country. To avoid the possibility of such a move, I would expect the Iraqi leadership to continue the façade of an integrated nation while at the same time giving the Kurds as much autonomy, short of secession, as they want.

Iraq needs the oil as well.

The Upcoming Surprise War

Image via Wikipedia

It will be a surprise in the West, at least.  Get ready for a vicious little war in Sudan that will spill over into Uganda and Ethiopia. And it will be about oil.

Come January, the independence referendum in southern Sudan will either have been approved resoundingly or Khartoum will delay the vote.  Both will result in war and if anyone thinks that Darfur is bad - well, you ain't seen nothin' yet.

The proposed border is vague, to say the least. The oil resources straddle the border. Northern Sudan has been at war in the south for three decades. Over 1 million people have died. Both the north and south depend on the oil revenues while China and India depend on the oil. The rest of the planet is distracted - there will be no US or EU intervention.  The African Union is weak and broke.

The factors coming together - oil, religion, geography and no prospect of outside intervention - are deadly.  The importance of avoiding a major conflict cannot be overstated.  If Uganda and Ethiopia become destabilized the prospects of penetration by trans-national Islamic militants is huge and their own internal problems will be made worse.  Loss of oil production will force China and India to look elsewhere - and prices will go up.

Three months and counting.

Moscow

OK. I've been here for a couple of days involved in government meetings and World Bank project reviews. Busy - little time for blogging.

But, on Russia Today yesterday (a morning news program) there was a brief announcement concerning oil. If anyone thought Russia was solely interested in saving Abkhazia from the depredations of Tbilisi, the news that Rosneft, the Russian state-owned energy company, would soon begin drilling operations in the Black Sea off the coast of Abkhazia should now be disabused of that thought.

The Russian government has been intensifying its efforts to secure oil and gas resources. Putin and Medvedev have been on the move(Bulgaria, Kazakhstan and Mongolia for example and meetings with Turkey in Russia); many of the visits were focused on energy and other natural resources. This comes as no surprise as Europe attempts to unchain itself, and therefore its policies, from dependence on Russian energy. Russia is doing everything possible to disrupt these efforts, such as reinforcing its contracts in Central Asia and interfering with Nabucco. The dance is interesting but will likely take a backstage role as the Russian economy continues to unravel.

The Ministry of Economy down the street from my office here announced a 10.5% economic drop year-to-year April while Putin announced simultaneously that industrial production had fallen by 16.9 percent. Unemployment is over 8% and rising. What this shrinkage means for Russia's continued aggressive foreign policy moves remains to be seen.

Update: Just today, the leading business newspaper and magazine in Russia Kommersant Daily (subscription required)announced that Gazprom is seeking a role in a pipeline project that would carry Iranian natural gas to Pakistan. Russia looks favorably upon the project because it would help to reduce competition from Iran in providing gas to European energy markets.

Russian Flexibility in Defense of Empire

Russia, through its foreign policy wing, Gazprom, has changed its position on penalties imposed against Ukraine for not purchasing the contractual amount of gas. Now it will impose the penalties according to Kommersant Ukraina (sorry, no link). There is nothing wrong with this based on contractual law - except for the glaring fact Gazprom and Russian Prime Minister Vladimir Putin had said in March that Russia would not demand penalties connected to Ukraine’s import shortages.

The fact that Putin and Russian government are untrustworthy and, basically, liars, is secondary to the use of the oil/gas weapon to recreate the Soviet Union. But Russian proclivity for outright lies should be noted.

Georgia, Moldova, Turkmenistan and Armenia

Except for Turkmenistan, the donor community has poured tens of millions of dollars into Georgia, Moldova and Armenia. For all the money, Moldova remains an economic basket case and Georgia is in entropy mode. Armenia may move away from the downward spiral it has been experiencing since the end of the 1993 war with Azerbaijan - but it won't have anything to do with the development aid it has received over those years. It will be because of changes in the geo-political make-up of the region, the rise of Turkey and a resurgent Russia intent on re-creating the Soviet Union.

Moldova is an interesting case because I recall a heavy emphasis - at the expense of economic and business support - on civil society programs. This was particularly the case with USAID whose local mission was in thrall to civil society. The problem with that is a poor household does not really care about civil society if it has little or no income or food. What is also surprising is for all intents and purposes, the current government won the election by a few points. They call themselves "communist" but in reality they are not. They simply have an un-reformed soviet style system - despite all that foreign aid - which lives up to its previous inefficiency. Moldova's biggest and unrecoverable mistake was seperating from Romania. The second problem is the Transdneister, that sliver of illegal, trafficking, blackmarket and gun-running dirt with its own unrecognized passport and thousands of Russian troops to protect it from Moldova, of which it is a part. The Transdneister problem is what keeps Moldova tied to Russia. No development aid that does not take that into consideration will succeed. Nor will it succeed without strong political will within the Moldovan government to change. That may require a change in the system.


Georgia - well, that's a different case. It is very clear that Saakashvili must go. It may be that his attempt to assert central government control over the break-away regions of Abkhazia and South Ossetia was partly due to his promise to the more nationalistic parties in Georgia to do so and thereby win the last election, but now comes the blow-back. It was never really important for Georgia to regain control of those two regions over which it has had no effective control for a decade. Even if Russia has overreached and concentrated the attention of Turkey and Azerbaijan on its newly imperial ambitions, Georgia is now in danger of disintegration as long as Saakashvili remains. If Georgia loses Batumi, then it loses its oil transit revenues. A graceful way out is needed and the opposition must come up with a plan for moving forward economically, socially and politically and not just have the removal of Saakashvili as its goal.

Turkmenistan has now accused Russia, through Gazprom, of blowing up its gas pipeline on the Uzbek border this week. That may well be true. It will be interesting to see how the gas war develops because Russia is determined to gain almost total control of gas resources either through production or lines. This is the real great game developing in the western areas of Central Asia.