Tuesday, March 1, 2011

Don't Make An Oil Deal With Unhinged Dictator

By Steve LeVine
This commentary was published in the Foreign Policy on 01/02/2011

Libya falls squarely into the central aim of this blog, which is to identify and follow the geopolitical impact of energy events. Libya is fundamentally an energy event. After decades of ostracism because of his terrorist attacks and links, Col. Moammar Qaddafi was re-embraced by the international community in 2003, led by the United Kingdom and the United States, for one primary reason -- he said he would open his oilfields to their companies. Oh, there was the renunciation of terror, too -- no trivial matter -- but then-British Prime Minister Tony Blair reversed Britain's stand on the Libyan-ordered Lockerbie airline bombing specifically to shoehorn BP, Britain's biggest company, into some monstrous new oilfields. The same went for the rest of Europe and the U.S., where ConocoPhillips, Hess and Occidental also got oil deals.

Eight years later, we observe the geopolitical impact in the spectacle of Qaddafi provoking an unnecessary civil war, and roiling world oil markets, all so he can continue his almost 42-year rule. The energy-geopolitical takeaway -- political and financial compromise with a certain class of petro-tyrant can rebound back on you profoundly, destabilize a region, and shake up economies, all while tarnishing you with the same brush. One also doesn't know if, in the end, the deals themselves will all hold up.

There's much debate about the matter of getting in bed with Qaddafi. At the Financial Times, writer Edward Hadas argues in this video (no embed available) that Qaddafi's behavior over the years "could have been worse" had the West not embraced him. The Economist understands that business and diplomacy must be done, but notes that Qaddafi "seems to crave blood," and suggests that countries and companies must keep that in mind when cutting deals with plainly unhinged individuals. "Countries dealing with dictators should never confuse engagement with endorsement and ... the West should press for human rights and democracy -- even when it is inconvenient, as it is with China and Russia," the magazine writes.

One can certainly make a list of countries whose leaders deserve ostracism, but that isn't the litmus test. Instead, where else might the thirst for oil or some other commodity come back to haunt us with geopolitically bad consequences? Given events so far, the autocrats of the world are mainly dialing back on the harsh stuff and seeking conciliation with the street -- witness Bahrain, Oman and Yemen.  

But there are oil-rich dictatorships whose leaders are doubling-down in the confidence that they risk more by either doing nothing or going soft. Iran may have arrested key opposition leaders Mir Hussein Moussavi and Mehdi Karroubi. Many of Iran's leaders definitely meet the unhinged litmus test, yet apart from China most of the world has stopped doing big business there, at least openly. China could be a case of future mortification -- it has a habit of cracking down in ways that have helped fuel the Middle East unrest, including on Sunday in Beijing after Internet calls for a "Jasmine Revolution." Yet the West does not go too far in criticizing Beijing -- Washington, for example, is hooked on a type of commodity market -- China's hunger for U.S. Treasury bonds. 

Russia, meanwhile, is profiting from the trouble. As John Helmer reports, Italy -- Libya's biggest natural gas customer before the trouble -- has replaced the volumes with supplies from Gazprom.

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