After the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland – an event that was pinned on Libya despite flimsy circumstantial evidence – Qaddafi became an international pariah. Keen to be liberated from UN and US trade sanctions, and to have his country removed from the State Department’s list of terror sponsors, Qaddafi eventually took responsibility for the bombing (without acknowledging culpability) and agreed to set up a $2.7 billion reparations fund. Not coincidentally, this came in 2003, when the Bush Administration was demonstrating to the world its willingness to topple world leaders it didn’t like. Trade sanctions quickly evaporated, and all the western companies that had been chomping at the bit to enter Libya were off to the races. Indeed, it would not be long before BP started lobbying the British government to release Libyan prisoners to protect its commercial interests. The Libyan convicted of the Lockerbie bombing, Abdelbaset Ali Mohmed al-Megrahi, was released on claimed medical grounds in 2009, with BP denying any involvement in his case. Apparently, however, that wasn’t enough to placate Qaddafi. Later that same year, Qaddafi threatened the security of the big oil companies’ leases if they did not fork over approximately $1.5 billion to help him cover the Lockerbie reparations.
According to Russ Baker’s reporting, the figure demanded by Qaddafi did not just come out of thin air. In early 2008, Libya placed $1.3 billion into a complicated investment fund with Goldman Sachs. The crash soon erased 98% of that fund’s value. As the pugnacious Matt Taibbi reported, Goldman executives were so frightened by Qaddafi’s possible response to their misrepresentation and incompetence that they decided to sell their soul to the devil, offering Qaddafi a huge equity stake in Goldman itself. When that offer was spurned (and one must take a moment to ponder the deliciousness of the irony here), Goldman continued to make other proposals, including one deal that included a sweet $50 million payment to an investment firm “run by the son-in-law of the head of Libya’s state-owned oil company.” As Taibbi puts it:
This is classic modern investment banking. You pitch some kind of deal to a city, state, or country, and it may or may not be a good deal for the actual citizens/residents whose money is at stake. But you can make it objectively a great deal for the individual officials with the power to sign off on the deal by sending a big fat check either to the politician in question or to some local slimeball consulting firm of his or her choosing. Anyway, there is some reason why we journalists are not supposed to call things like Goldman’s proposed “$50m payment” bribes, but I can’t remember what it is.[...]
I’ve talked to a lot of people who got on the wrong end of a bad Goldman deal, and I never heard any hint of Goldman coming back with flowers and chocolates after the date rape. What makes the Libyans deserve such special attention? One wonders if you get better service from an American investment bank if the threat of beheading is behind your business deals.