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Russia Plays Damage Control In Last-Ditch Effort To Save Business Interests In Libya

Then Russian President Vladimir Putin (left) and Libyan leader Muammar Qaddafi at Qaddafi's residence within the Bab al-Aziziya barracks in Tripoli in April 2008
Then Russian President Vladimir Putin (left) and Libyan leader Muammar Qaddafi at Qaddafi's residence within the Bab al-Aziziya barracks in Tripoli in April 2008
By Tom Balmforth
MOSCOW -- Russia's belated recognition of Libya's provisional leadership on September 1 carried a hint of desperation.

For months, Moscow had refused to recognize the National Transitional Council (NTC), was reluctant to distance itself from Muammar Qaddafi, with whom it had good relations, and was critical of NATO's military campaign to assist rebel fighters.

But with the NTC now in control of most of Libya, Russia fears that it could lose billions of dollars in energy, defense, and infrastructure contracts it had negotiated with the ousted Qaddafi regime.

Russia's policy toward the conflict has appeared schizophrenic from the very start. Moscow did not veto the United Nations resolution authorizing NATO air strikes, but it also declined to vote for it. Shortly thereafter, Prime Minister Vladimir Putin called the Western alliance's bombing campaign "a crusade" -- which drew a rare public rebuke from President Dmitry Medvedev.

The ambivalence, analysts say, was an effort to protect Moscow's interests in Libya regardless of the conflict's outcome.

But as Pavel Baev of the Oslo-based International Peace Research Institute notes, Russia's business deals, which were concluded in close cooperation with Qaddafi himself, were in jeopardy as soon as it became apparent that the rebels would win.

“In many ways, [Russia's] line was doomed to failure from the very beginning," Baev says. "I don’t think there were any doubts that it would end in any other way. The losses as far as economic interests are concerned were in the cards from the start because all of them were negotiated by Qaddafi and through Qaddafi.

"In this respect, the moment the uprising started, those investments had to be written off. No amount of diplomacy would have saved that.”

Lion's Share Of Contracts

By the time Russia finally recognized the NTC on September 1, international officials were already gathering in Paris to discuss Libya's economic and political future. Moscow's envoy, Mikhail Margelov, was present at the conference and pledged to defend Russia's economic interests in the country.

But most observers now expect that France, Italy, and Britain, who played leading roles in the NATO intervention, are poised to snap up the lion's share of Libya's international contracts.

Despite the recognition of the NTC, which came four days after the Libyan Embassy in Moscow officially raised the rebel flag, Russian officials continued to insist that the NATO air campaign, which was initially authorized to protect civilians, had exceeded its UN mandate by helping the rebels overthrow Qaddafi.  

Russian Foreign Minister Sergei Lavrov speaks to students at the Moscow State Institute of International Relations in Moscow on September 1.
Speaking to students at the Moscow State University for International Relations on September 1, Russian Foreign Minister Sergei Lavrov condemned the Atlantic alliance.

"However, in the fulfillment of the resolutions on Libya, NATO members and some other states flagrantly violated the principles of the supremacy of law, disregarded the initiatives of the African Union and the United Nations, and increased the number of civilian casualties," Lavrov said.

Moreover, a statement on the Foreign Ministry's website, where the NTC recognition was announced, stressed that Russia believed the contracts negotiated with the Qaddafi regime should remain in force.

"We proceed from the position that previously concluded contracts and the sides' other mutual obligations remain between the two states and will be implemented in good faith," the statement read.

$4 Billion Lost

Russia's state arms exporter, however, has already lost an estimated $4 billion in Libyan contracts after an arms embargo was imposed on Libya by the UN Security Council in March.

And other deals also appear to be at risk.

Russian state-run natural gas monopoly Gazprom, for example, has invested $200 million in energy exploration in Libya over the last five years.  

Oil firms GazpromNeft and Tatneft also have exploration and extraction contracts worth billions of dollars, including recent deals to expand existing development projects.

And Russian Railways had secured a $3 billion contract to build a high-speed rail link from Sirte to Benghazi.

Many of these contracts were either signed in Qaddafi's presence or were organized by him personally. Russia's state news agency, ITAR-TASS, estimates that the country could lose as much as $10 billion in business if Libya's new leadership challenges the legality of the existing contracts.

In addition to seeking to protect its business interests in Libya, observers say Russia's ambivalence over the conflict was rooted in a wariness of Western-backed revolutions on one hand and a desire to be in sync with the international mainstream, which sought Qaddafi's ouster.

This was evident in Lavrov's comments at the Moscow State University for International Relations. "The experience of Iraq, Afghanistan, and Libya, as well, shows that, in the end, only the people themselves can choose the  future of their countries," he said, "while armed external interference in internal conflicts creates a risk of escalation of the confrontation in these parts of the world. If this sort of  projection of force becomes more common, there will arise a real threat of chaos in international relations."

'Very Problematic Position'

Meanwhile, analysts caution that it is not yet entirely clear who will turn out to be the big winners once the dust has finally settled and Libya's postconflict arrangements come into place.

"In this respect," Baev says, "business in Libya is a very problematic proposition for anybody, whatever side of the conflict you have taken. It's problematic for Italy, for France. It's not only Russia that has lost there. Seriously. It's one of those cases where it is very difficult to pick winners.

"For that matter, it is difficult to say that NATO has scored a victory because the performance was so unconvincing that the organization hardly improved its credibility and coherence."

Likewise, Aleksandr Konovalov, head of the Moscow-based Institute of Strategic Analysis, argues that Russia's ambivalent approach could end up paying off in the long run.
 
"Russia has conducted itself fairly reservedly on the one hand, allowing the resolution on military action," Konovalov says, "and on the other hand condemning the way it was carried out. In that way, it has been respectful to the Arabs but also met halfway with the West.

"You can't sit between these camps for too long, but you can for a little. And Margelov is in Paris today -- Russia is not refusing to participate. We have calculated on making the train, even if we are not in the first carriage.”

Tom Balmforth

Tom Balmforth covers Russia and other former Soviet republics.

 

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Comment Sorting
Comments
     
by: Jack from: US
September 02, 2011 15:25
Russia's Lybia's contracts were hardly worth anything given all of the oil extracted in Lybia has been extracted by Western companies. It is the threat by Gaddafi to cut off British and French companies unless they compensate Lybia for unjust sanctions during 90-ies which was the real reason for NATO bombing of Lybia. So Russia "lost" what it did not have to begin with. On the other hand NATO countries lost billions of $ in real money, from drastic fall in oil production (by 95% or so) as a result of NATO-incited war, from destruction of Lybian infrastructure which someone will have to pay for, from the imminnent theft of Lybia's sovereign money by new "rulers", who are nothing more than thugs. Lybia will be in chaos for years to come, controlled by various warring gangs of "freedom fighters", so NATO countries will hardly be able to get to the oil they want, much less recoup the losses they already incurred.
In Response

by: Eugenio from: Vienna
September 03, 2011 05:49
completely agree with Jack
In Response

by: Andrew from: Auckland
September 03, 2011 06:39
Ah, Jack the Kremlin mouthpiece spouts his rubbish again.

Really Jack, if you love Russia so much, go and live their, your leaving the US for RuSSia will raise the average IQ of both countries.

It is also interesting to note the absolute hypocrisy of the Russian government, especially "spider" Lavrov, when he complains that NATO exceeded their remit under the UN resolution, funny how the Russians did not even bother with a resolution when they invaded Georgia and led the ethnic cleansing operations in 2008, just as they did in 1992-94.

Russia is a mafiya state, and the Libyans will not forget who it was who propped up and defended Gaddafi, just as the Syrian and Iranian public loathe Russia, so do the Libyans.

And with good reason.
In Response

by: Maksat from: Central Asia
September 03, 2011 14:56
Completely agree with Andrew.

There can't be any justification for tyrannies and despots and for those who support them whatever interest there is. Look at Central Asian democrat people in shadow, they mostly hate Kremlin for its support for authoritarian rulers. Russia (and China) will pay the price as soon as the domino effect of the revolutions reach to gas-rich Central Asian states. No one would care about so called CIS or SCO as far as they are the umbrella organization for dictators.
In Response

by: Anonymous
September 05, 2011 20:23
This is a version of the facts about Georgia war

that only the U.S. and Georgia supports


All international investigations and deny your version of events

You do only propaganda , like happen in every regime
In Response

by: Anonymous
September 05, 2011 20:27
please

tel me ... Maksat from: Central Asia

what is now Georgia , a democracy ?

Realy I dont think yes
In Response

by: Andrew from: Auckland
September 06, 2011 06:02
Actually "Anonymous" the international investigations especially the IFFCMG (OSCE & EU) report stated that Russia and the separatists were responsible for ethnic cleansing and other war crimes against the indigenous Georgian population.

So did the HRW report, as did the report by Memorial a Russian human rights group.

The IFFCMG report also stated that all Russian actions were illegal under international law.

So please, provide some evidence of your claims "Anonymous"

BTW, Georgia is more democratic than any former Soviet Republic except Latvia, Estonia, and Lithuania.

Certainly it is not a fascist state like Russia.
In Response

by: Max from: DC
September 23, 2011 01:03
Completely agree with Jack as well, he speaks the truth, to the disappointment of the so called "professional" liars in Prague.
In Response

by: Johann from: USA
September 13, 2011 15:19
I completely agree with Jack. It would have been better to have Gadaffi in power in Libya, and Mubarak in power in Egypt. Nobody knows about what the Muslim rulers of Libya, are really planning. All this is bad for Isreal, like unifacation of Germany was bad for France and The Brits ! It was also bad for Russia that Putin had to leave the presidency. Putin is The Hero that saved Russia from Anarcism. I am wondering about, if the new rulers of Libya, are real friends of the West, or Muslim terrorists !!!

by: Bailianhua from: Sydney
September 03, 2011 23:57
Libya historically is closer to Italy and other mediterranean countries than Russia anyway. Also, Russia tends to side with dictatorships these days and maybe should man-up and defend the rights of people instead of crooked leaders...
In Response

by: Observer from: Australia
September 07, 2011 06:21
The Russkies are not keen to critisize other dictatorships because the same blood runs through their own veins. They support other dictators because they share the same mindset and would do the same thing if their turn comes.

by: rick from: Milan
September 05, 2011 20:10
Any way

If Russia wanted to avoid everything

she could do it very well

denying its "yes" on UN council .


I am convinced that russia

in exchange for his "yes"

had something of much more interessant than Llibia

by: 1
September 12, 2011 03:35
What is better France paying and sabotaging the events or Russia not supporting Nato? I think one has no eyes if one supports Nato!

Georgia is not a democracy, not at all.

Central Asia is a falling into, what ever it will be, place.

by: Charles from: Russia
September 14, 2011 07:18
I believe it's spelled "Libya," dear friends.

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