Shady dealings helped Qaddafi build fortune and regime

[This is the headline over an article in today's edition of The New York Times. It reads in part:]

In 2009, top aides to Col Muammar el-Qaddafi called together 15 executives from global energy companies operating in Libya’s oil fields and issued an extraordinary demand: Shell out the money for his country’s $1.5 billion bill for its role in the downing of Pan Am Flight 103 and other terrorist attacks.

If the companies did not comply, the Libyan officials warned, there would be “serious consequences” for their oil leases, according to a State Department summary of the meeting.

Many of those businesses balked, saying that covering Libya’s legal settlement with victims’ families for acts of terrorism was unthinkable. But some companies, including several based in the United States, appeared willing to give in to Libya’s coercion and make what amounted to payoffs to keep doing business, according to industry executives, American officials and State Department documents.

The episode and others like it, the officials said, reflect a Libyan culture rife with corruption, kickbacks, strong-arm tactics and political patronage since the United States reopened trade with Colonel Qaddafi’s government in 2004. As American and international oil companies, telecommunications firms and contractors moved into the Libyan market, they discovered that Colonel Qaddafi or his loyalists often sought to extract millions of dollars in “signing bonuses” and “consultancy contracts” — or insisted that the strongman’s sons get a piece of the action through shotgun partnerships.

“Libya is a kleptocracy in which the regime — either the al-Qadhafi family itself or its close political allies — has a direct stake in anything worth buying, selling or owning,” a classified State Department cable said in 2009, using the department’s spelling of Qaddafi.

The wealth that Colonel Qaddafi’s family and his government accumulated with the help of international corporations in the years since the lifting of economic sanctions by the West helped fortify his hold on his country. While the outcome of the military intervention under way by the United States and allied countries is uncertain, Colonel Qaddafi’s resources — including a stash of tens of billions of dollars in cash that American officials believe he is using to pay soldiers, mercenaries and supporters — may help him avert, or at least delay, his removal from power. (...)

In the first few years after trade restrictions were lifted — Colonel Qaddafi had given up his country’s nuclear capabilities and pledged to renounce terrorism — many American companies were hesitant to do business with Libya’s government, officials said. But with an agreement on a settlement over Libya’s role in the Pan Am bombing over Lockerbie, Scotland, finally reached in 2008, officials at the United States Commerce Department began to serve as self-described matchmakers for American businesses. (...)

When Qaddafi aides demanded payment for the Lockerbie settlement from oil companies operating in Libya, a State Department cable in February 2009 reported, industry executives had indicated “that smaller operators and service companies might relent and pay.” Several industry officials and someone close to the settlement, all speaking only on condition of anonymity, said the payments went through but declined to identify the businesses.

Other companies also struck costly deals with the government. In 2008, Occidental Petroleum, based in California, paid a $1 billion “signing bonus” to the Libyan government as part of 30-year agreement. A company spokesman said it was not uncommon for firms to pay large bonuses for long-term contracts. (...)

Looking back on the decision in 2004 to resume business dealings, Juan Zarate, a former top White House and Treasury official in the administration of President George W Bush, said that officials had believed then that the benefits of trying to rehabilitate Colonel Qaddafi outweighed the obvious risks. “It was a deal with the devil,” Mr Zarate said.

“The hope was that with normalization, Qaddafi would serve less as the mad dog of the Middle East and more as a partner,” he added. “But I don’t think this is the way anyone would have wanted it to work out.”