Russia writes off Libya debt – $4.6bn

The high point of President Putin’s visit to Libya this week was the announcement that Russia was to write off Libya’s $4.6 billion debt. In exchange, a number of massive bilateral trade deals have been agreed.

A cheerful, but slightly over-heated President Putin told reports

“I am satisfied by the way we have solved the debt problem. The deal will not only employ Russian defence enterprises but will also help strengthen Libya’s defences.”

I must say, I find it fascinating that both Putin and the world’s press have been majoring on the military aspects of this deal.

True, the Russian defence industry will benefit to the tune of a couple of billion dollars worth of new business as Libya modernises its military after decades of sanctions. But in pure money terms, the $3 billion deal to build a new coastal railway line and Gazprom’s proposed gas exploration deal are likely to be far more valuable.

For the press, the attraction of explaining the deal in terms of debt for arms is obvious. But for Putin, it’s yet another opportunity to emphasise Russia’s remerging military muscle. After all, selling arms to an African country is a much better way to promote your military prowess than invading a neighbouring country. And much less risky…

But, I digress. Next stop for Putin is a trip to Sardinia, where he’ll be meeting new Italian PM Silvio Berlusconi. No debt to forgive there, and no chance of arms sales. But Italian energy giant Eni has significant business interests in Libya, and would make a useful partner.

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14 Responses

  1. Libya has engaged in some interesting foreign policy moves of late.

    Along with Russia and others, it recently voted for a UN Security Council Resolution rebuking Iran (Indonesia abstained, with no countries voting against the resolution). At about the same time, Libya issued a staunch statement against recognizing Kosovo’s independence.

    For much of recent history, Libya has been perceived as a militantly Islamic state, with close ties to Iran.

  2. Andy says:

    Yes, Libya has been making significant moves in the past few years to build ties with other countries, and come back from its pariah state status. Presumably Gadaffi has realised that being poor is no fun, and a quick road to eviction from his job at the top.

  3. I recall official Soviet transcipts of Gadaffi era Libyan-Soviet meetings having a qualifier along the lines of: while the two sides don’t agree on everything.

    There was a diplomatic thought related to Soviet differences with many Arab countries on Israel. The USSR wanted Israel in the Middle East, because Arab hatred of the Jewish state gave the Kremlin a presence in the form of arms. With no Israel, the USSR would arguably have had a reduced role in that part of the world. During a Cold War era UN Security Council debate, the Saudi rep. accused the USSR of aiding Israel, via the releasing of highly skilled Soviet Jews to Israel. In that instance, the Syrian rep tryed to mediate. I suspect the Israeli rep might’ve found that exchange somewhat amusing.

    As for the present: Libya’s going along with that vote against Iran, coupled by the former’s opposition to Kosovo’s independence is a further sign that the idea of appealing to the so called “Muslim street” isn’t definitively clear; given how that street has different aspects.

  4. In fairness to the reference about the Arab-Israeli conflict helping the Soviets gain influence the Middle East: the USSR did provide non-military assistance on matters like the Aswan High Dam and providing advanced education for some Arabs. Nevertheless, the arms factor played a lead role vis-a-vis the Arab-Israeli conflict.

  5. Andy says:

    Oh, absolutely. Although it has to be said, the US were also heavily involved on both sides, providing massive amounts of military aid to both Egypt and Israel in the name of maintaining the regional balance of power.

    Whether the maintenance of the regional balance of power by militarizing the region did more good than harm is, of course, a point we could debate ad infinitum…

  6. The winning over of Egypt (Sadat) is classic propaganda.

    Shortly after Nasser’s death, the Israelis came out with true enough quotes, showing how Sadat admired Nazi Germany. As Sadat drew closer to the West, there was a greater “understanding” as to what he “meant”. Germany at the time could be seen as an offset to the Britain and there’s enough wiggle room to express a limited (a stress on the limited)admiration at how Germany picked itself up after the devastation of WW I.

    Interesting how major powers can have influence over regional rivals. Greece and Turkey in NATO, with Romania and Hungary having differences despite joint periods as Nazi and later Soviet allies.

  7. Tim Newman says:

    Although it has to be said, the US were also heavily involved on both sides, providing massive amounts of military aid to both Egypt and Israel in the name of maintaining the regional balance of power.

    This isn’t quite right, Andy. The US imposed an arms embargo on Israel from 1947 until 1962, and it was only in 1968 that Israel started to receive significant American kit. The reason for this was not that the US has witnessed the Six Day War, where well-armed Arabs using Soviet kit had nearly annihilated Israel, who were struggling to find a decent arms supplier. Up until 1968, Israel got its weapons primrily from Czechoslovakia and France.

    Up until the Camp David agreement of 1979, it was the USSR who supplied Egypt with its military kit, not the US. In order to persuade Israel and Egypt to sign the peace agreement between them, the US offered each side an enormous bribe in the form of military assistance if the two sign up and keep the peace. This is how the US came to be supplying massive amounts of military aid to Israel and Egypt, it was not done in order to achieve a balance of power in the region, even if that has been the (rather welcome) effect.

  8. Aleks says:

    Further to non-US support prior to 1968, It was france that provided Israel with its first nuclear reactor and the UK who provided sufficient quantities of ‘heavy water’ (as was disclosed last year on the lifting of the ’30 year rule’ of official state secrets).

    The again, there is ‘official’ and ‘unofficial’. Whereas the US did not directly supply arms to Israel, there remains a question as to whether it turned a blind eye, in particular to the transfers that I commented upon above. France and the UK blew their influence with the 1956 Suez Crisis debacle, so it is hard to see how the US who filled the remaining vacuum in the middle east could have been caught unawares.

    On the Libyan thing, Gadaffi might be encouraging Russia’s interest as a counter balance to the EU’s interest in securing the export of Libya’s energy to the EU. There’s been a lot of talk about the Caspian, Azerbaidjan etc., but Libya normally falls under the radar when it comes to energy…

    One step forward. What of the US? Russia continues to make deals with european states (Hungary on South Stream, Germany on the baltic thing, Italy possibly on a Libyan deal), so despite the greater heated words, there seems to still be no effect on FDI and business between Russia and the EU. Germany and France swatted the NATO summit in Bucharest over Georgia and the Ukraine and now Berlusconi is back on the scene.

    We’re certainly set for a fascinating few years. Whither NATO and the US in the grand european scheme of things???

  9. There’re definite contradictions to the “New Cold War” theme.

    Some have characterized the current and possible future Russia-West differences as having a relationship more akin to the old Cold War relationship between France and the US. A blend of differences and mutual agreement.

  10. Tim Newman says:

    What of the US?

    I think the pattern is for the US to be disengaging from Western Europe in many ways, and concentrating on the Far East, meddling a little in Eastern Europe as it goes.

  11. Aleks says:

    Sounds about right. The Galileo project has been given the go ahead which will provide EU satellite independence (i.e. they can bomb without US approval), Sarko offers for France to join NATO in return for an EU military planning center, the European Defence Agency (joint military procurement body) is up and running etc. Dependence on the US is declining.

    I was wondering of possible down the line repercussions of the shut down of the grangemouth oil refinery (and the forties pipeline) in Scotland? I get the impression that despite there techincally being no problem (i.e. high stocks etc.) it is quite a strong impact in a way the Russia/Ukraine cut-offs didn’t (i.e. it enters the public consciousness more strongly) and how it could be wielded politically in a punch up with Russia or influence domestic politics. Or, would Rosneft (if it had bought the refinery for example) would have handled the situation with workers better than the current private company that recenty bought it? Imagine the flak from the press…. 🙂

  12. Tim Newman says:

    Or, would Rosneft (if it had bought the refinery for example) would have handled the situation with workers better than the current private company that recenty bought it?

    If Rosneft bought the refinery, it would lose its operating license within minutes. Rosneft’s management systems with regards health, safety, and environmental issues would come nowhere close to satisfying the UK’s Health and Safety Executive.

  13. Andy says:

    Come on Tim, they’d be fine. So long as Rpsneft agreed to follow British rules while in Britain, the HSE will be perfectly happy for them to dip their employees in vats of boiling oil in the rest of the world. 😉

    Aleks – I think British concerns about the oil refinery shutting down are more related to a previous oil shortage (in September 2000) than to wider considerations.

    Happily I was out of the country at the time (in Russia, as it happens), but essentially truck drivers unhappy at the high cost of oil blockaded oil refineries across the country, shutting off the country’s petrol supply.

    End result: Panic buying of petrol for a while, and then stocks pretty much ran out.

    Amusingly, the ‘high’ cost of oil the truckers were protesting about was $30. How times change.

  14. Tim Newman says:

    So long as Rpsneft agreed to follow British rules while in Britain, the HSE will be perfectly happy for them to dip their employees in vats of boiling oil in the rest of the world.

    Heh! This is very true, but the British rules would be extremely difficult for a company like Rosneft to follow. Corporate management is a huge factor in complying with UK HSE rules, and Rosneft’s just isn’t robust or transparent enough. Shell struggles to comply with the HSE at Stanlow from time to time, I think Rosneft would fall at the first hurdle.