Diplomatic inertia

By the time you read this piece, or thereabouts, the US will be in the process of upgrading its embassy in Libya to one of full ambassadorship—since the removal of sanctions in 2004, the US embassy in Tripoli has been manned by a charge d’affaire. While several Congressional delegations have visited Libya since then, Secretary of State Condoleezza Rice is also expected to visit Libya next month, perhaps to coincide with the upgrading of the embassy status.

Before we get to why this is important for us in India, it’s interesting to note that since the lifting of the sanctions, the Oasis Group (US oil firms ConocoPhillips, Marathon Corporation and Amerada Hess Corporation) walked back into Libya at the fag end of last year to reclaim their exploration and production interests on payment of $1.3 billion, and on terms similar to the ones when their contract was first suspended in 1986, when sanctions were first imposed on Libya—while the concession on these discovered fields, which produce a whopping 350,000 barrels of oil per day, has been extended by 25 years, Indian oil firms are finding it difficult to even get a year’s extension on their work programmes in the oil fields they’re working on to look for oil! Re-entry into Libya will boost Marathon’s output by a whopping 20 per cent, ConocoPhillips’ by 4 per cent, and Hess’ by over 9 per cent. This US coup, by the way, has to be seen in the context of the fact that Libya is now auctioning new fields, and on increasingly less lucrative terms, to the concessionaires. In the first round of bids post-sanctions, the IOC-OIL combine won one field after offering to keep just around 18 per cent of the oil it found (the bids were on such sharing) while in the next round it won the bid by just keeping a much lower 10-11 per cent of the oil.

The US, of course, is not the only country to shower Libya with important visits. Tony Blair visited Libya for four hours in 2004, sandwiched between two summits, and managed to announce a billion dollar gas exploration deal for Shell during the visit. Other heads of state who’ve visited Libya since UN sanctions were lifted (in September 2003) include French President Jacques Chirac, (then) German Chancellor Gerhard Schroeder, and Italian Prime Minister Silvio Berlusconi, among others—Berlusconi, in fact, has visited Libya three times in the last 2-3 years.

What’s interesting, or sad, depending upon your point of view, is that while Indian companies such as power equipment firm BHEL, oil majors ONGC, OIL and IOC, housing firm NBCC (all of which are PSUs) and private sector firms like DS Construction are in the race for lucrative Libyan contracts, our government hardly shows the same degree of urgency to pack in high-level delegations to that country, given just how effective such visits have been for countries like the US, the UK, and China.

BHEL, which already built one 240 Mw power plant in the 1980s, is currently working on a 600 Mw one and is in the running for another 1,400 Mw one, which was to be given to the Koreans but the deal fell through. The country is in the process of selling a part of the stake in two of its state-owned refineries, Ras Lanuf and Al-Zawia, and this is something our firms like IOC would love to get into (indeed, Libya plans to increase its refining capacity three to four times to one million barrels per day). Since it plans to increase oil production from around 1.7 million barrels per day to the pre-sanctions level of 3 million by the end of the decade, Libya will offer another 261 oil blocks during the next 8-10 years.

This year, India has already got, on a nomination basis, the right to build 10,000 residential units out of the 50,000 Libya is constructing. The possibilities of future contracts in Libya, especially those related to oil and gas, are enormous, and as a result of this, India’s exports, which were a mere Rs 90 crore in 2003-04, jumped to Rs 1,500 crore in 2004-05.

Yet, after Baliram Bhagat visited Libya in 1986 in his capacity as the head of NAM, Ghulam Nabi Azad was the first minister to visit in November 2004 (despite his relatively junior status, he got to meet Libyan leader Mu’ammer al-Gaddhafi due to India’s special relationship with Libya). Since then, however, just two ministers of state have visited Libya, and while Foreign Minister Natwar Singh accepted an invitation to visit, he later turned it down (this is well before his UN problems began, so that’s no reason for his change of heart) and Petroleum Minister Mani Shankar Aiyar had to cancel his visit due to a fractured foot.

Aiyar’s visit, whenever it does take place, will be welcomed, since 70 per cent of the country is still unexplored and its oil production is rising (that of most countries is stagnating/falling). Libya is the most important port of call for all oil ministers anyway. So it is unlikely the Libyans will regard his visit as a big political move/recognition on India’s part. What India needs are some purely political visits by high-ranking ministers, the Prime Minister or the President. Perhaps Aiyar needs to use his persuasive charms on his own colleagues in the Cabinet.