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Russia Set to Lose Billions in Libya

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 considers 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 Gazprom Neft 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 Sirt 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.”

By. Tom Balmforth

Copyright (c) 2010. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.

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  • Anonymous on September 05 2011 said:
    Guess getting ripped off of their billions from the invasion of Iraq didn't teach 'em anything.They had a chance to do something and did ... nothing, and now they will reap the well deserved benefits for being 2 faced.
  • Anonymous on September 05 2011 said:
    I would say that the Russians should put a "lien" on Libya. Qadaffi for all practical purposes WAS Libya. NATO went into Libya knowing that it had economic ties in place (obviously) with other countries and this should have been taken into consideration prior to throwing support behind the rebels. Otherwise this sends a dangerous message to countries to whom we are indebted to (China... Japan?)
  • Anonymous on September 05 2011 said:
    China also had $18 billion in contracts with Gaddafi, 75 major projects going and 35,000 personnel in Libya before this criminal assault on a sovereign nation. It looks like both China and Russia were seriously threatened before this assault by the New World Order crowd not to oppose this crime. Remember the words of Pastor Martin Niemöller:"First they came for the communists,and I didn't speak out because I wasn't a communist.Then they came for the trade unionists,and I didn't speak out because I wasn't a trade unionist.Then they came for the Jews,and I didn't speak out because I wasn't a Jew.Then they came for me and there was no one left to speak out for me."
  • Anonymous on September 05 2011 said:
    Russia is the largest producer and maybe exporter of oil in the world. The war in Libya sent the price of oil (WTI,BRENT)up well over $100, making Russia one of the big winners. In the ideal world of neo-classical economics the Russians would have figured this out, and their not using their veto was perfectly logical.As for the war itself, that was not about the civilians that morons like the UKs Cameron, and the excruciatingly stupid NATO Secretary Fogh Rasmussen talked about protecting, but was about oil. This is something that everybody should understand, repeat constantly, and not listen to anybody who thinks otherwise.Also, I wouldn't worry about deals that the Russians lost. Russian energy firms have plenty to do in Russia, which is a treasure trove of minerals, to include oil and gas. Of course they might have been dumb enough to waste time ourside Russia. After all, the US is still in Afghanistan.
  • Anonymous on September 05 2011 said:
    To the victor go the spoils! To hell with China! To hell with Russia! Long live the United States and the forging of the New World Order! We shall make the savages kneel and grovel at our feet.
  • Anonymous on September 05 2011 said:
    Such is the price of the righteous path.
  • Anonymous on September 05 2011 said:
    The very 'liberal' Obama is following Bush 2's evil neoconservative agenda at home and abroad.The Rothchild's wanted Libya,and they got it.The old creaking Zionist stooge; Senator John McCanns visit to 'his hero's'the rebels have NWO stamped on it.He's buddy with the Jewish Oligarchs of Russia,through his aide the dangerouse Randy Scheinmann, that Putin successfully deposed.(See American Free Press 1-888-699-NEWS).The Russin leadership must stand firm.People all over the world, who understand these issues see them as the only power other than China that can resist!
  • Anonymous on September 05 2011 said:
    Don't forget that the US/NATO is bankrupt. They can't afford any wars and they certainly can't afford to rebuild infrastructure. It is entirely likely that they will appeal to both Russia and China as partners given both of those countries are solvent. Further, left to NATO, those 'rebel leaders' are more two-faced than NATO -- it will be decades before NATO allies can realize any profits from Libya.The war on Libya was a desperate move on NATO's part, as with the recent threat to Syria. Very, very foolish indeed. But Rothschild, Queen "BP" Elizabeth and Queen "Shell" Beatrix have never been accused of being all that bright anyway.
  • Anonymous on September 06 2011 said:
    Why doesn't Russia save face by going one up on NATO. Simply invade Lybia with a massive ground force, kill ALL civilians, take all resources, then retreat and nuke whats left to hide the evidence they were there. That's only slightly more than what NATO is doing but it would be over quicker!
  • Anonymous on September 06 2011 said:
    Now, now, now. Let's not go off the deep end gentlemen. We only need a few genuine truths and a smile on our faces to convince the unlearned. Obama is incompetent. The attack on Libya was about oil. The United States of America can and should do business with Russia and China. And finally, no more stupid wars like Afghanistan, at least for a while.What all Americans need to be able to repeat from morning to night is Bill Tilden's 'golden rule of tennis'. NEVER CHANGE A WINNING GAME; ALWAYS CHANGE A LOSING GAME!
  • Anonymous on September 06 2011 said:
    If Gaddafi was good enough to sign oil contracts with he was good enough to support in his hour of need.I, too, was bitterly disappointed with Russia's lack of manhood and the fact they allowed Nato's war crimes, mass murder and illegal action to go on virtually unchallenged.They let it happen and then recognised the Al Qaeda terrorists NATO has put in power.Russia as good as colluded in the NATO criminality.I haven't the slightest sympathy now. Their own cowardice has cost them dear. So be it.
  • Anonymous on September 07 2011 said:
    Have a peruse at their new weapons show. Russia has a method to their madness, yet it was only fitting the take a loss at some point.Every thing about EACH of the the current wars was about opium and oil.USA is going on a huge losing streak.
  • Anonymous on September 08 2011 said:
    But WE - meaning ME - don't want the US on a huge losing streak, kmw. What we want is for American voters to stop electing people like George W. Bush and Mr O, and put a president in office who can add and subtract. What is so difficult about that?Of course, maybe that is asking too much. Ignoramuses in high offices start wars to get oil, and it just makes things worse.

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