Bloomberg News

Qaddafi Death Marks Start of Libya’s Transition, Challenges

November 02, 2011

(Updates with NATO plans in ninth paragraph.)

Oct. 21 (Bloomberg) -- The hunt for Libya’s Muammar Qaddafi united his opposition as they pursued the man who ruled the North African nation for 42 years.

Now, his death may bring to light their divisions.

The interim National Transitional Council, made up of former government officials and technocrats, had said it would wait for Qaddafi’s capture or death before forming a new government. It faces the challenge of establishing democratic rule in a country that Qaddafi governed without a constitution after toppling a pro-Western monarch in 1969.

The new government may seek to avoid the cracks that appeared among the pro-democracy forces that ousted the leaders of neighboring Tunisia and Egypt. The result for the two nations has been continued economic hardship and bursts of violence, say analysts including Samer Soliman, an assistant professor of political economy at the American University in Cairo.

“Libya needs to build institutions from scratch,” he said in a telephone interview yesterday. “The challenges in Libya are big and they haven’t had a chance to surface yet.”

While Africa’s largest oil reserves may enable the government to rebuild Libya’s economy more quickly than in Egypt and Tunisia, the hurdle facing the leadership is political: uniting the groups that rose up against Qaddafi’s regime and dealing with the remainder of his supporters.

It’s a test that Egypt and Tunisia have yet to pass, with power struggles among remnants of the old regimes, and political parties old and new clouding the outlook of transition and keeping foreign investors away.

NATO Mission Ending

Qaddafi was killed after an eight-month armed conflict that left thousands dead. Air strikes and logistical support from the North Atlantic Treaty Organization helped stop the advance of Qaddafi’s troops on rebel strongholds and allowed the opposition to score military victories that culminated in a sweep into the capital, Tripoli, in August.

NATO plans to end it military operation Oct. 31, the alliance’s secretary general, Anders Fogh Rasmussen, said on his Facebook page today. A final decision will be made next week, he wrote.

Qaddafi died from a gunshot wound to the head, inflicted after he was captured by fighters, Ibrahim Taykah, a doctor who said he examined the body, told Al Arabiya television from Misrata today. Another “important corpse,” possibly Qaddafi’s son and heir apparent Saif al-Islam, was being transported to his facility for autopsy, Taykah said. Mutassim Qaddafi, a Qaddafi son who led loyalist fighters in Sirte, died after being shot in the neck, the Misrata Military Council said yesterday.

Reconstruction Can Begin

The deposed dictator’s death means that the difficult work of reconstruction and reconciliation can truly begin, said George Grant, director for global security at the Henry Jackson Society, a Washington-based democracy promotion group.

“The experiences of other post-conflict environments in the last decade have repeatedly served as a reminder that this latter process can be more hazardous than winning the initial conflict itself,” Grant wrote in an analysis.

Concerns about divisions among rebels emerged when Abdel Fattah Younis, the rebel military chief who defected from Qaddafi’s government, was killed July 28 after he was taken into custody for questioning by his own side. The NTC has never explained his death. Rebels from Misrata, which withstood the onslaught of Qaddafi’s forces during the conflict, objected that the NTC board didn’t included representatives of their city.

‘Militia Problem’

“They have a militia problem beyond what I thought,” said U.S. Senator Lindsey Graham, a South Carolina Republican who visited Tripoli Sept. 29 as part of a Senate delegation.

“There’s 28 militias in Tripoli alone,” he said yesterday in Washington. “Every tribe, every group has their own little army, and that’s a real problem. You got to get the militias to lay their weapons down and buy into a national army and a national police force.”

Historically, tensions between east and west in Libya result from rivalries among Libya’s scores of tribes and from Qaddafi’s efforts to divide the country’s riches and power among the tribes that supported him, according to Edward Walker, a scholar at the Middle East Institute in Washington and a former U.S. assistant secretary of state for near eastern affairs.

“The division of the country poses unprecedented challenges going ahead,” said Nicolo Sartori, an energy and defense analyst at Rome’s Institute for International Affairs.

The conflict brought Libya’s oil output down to a trickle and may cause economic output to shrink 34 percent in 2011, the International Institute of Finance said in a statement Oct. 20.

Assets Abroad

The Libyan central bank and the country’s sovereign-wealth fund have about $168 billion in assets abroad. About $50 billion of that is in bank deposits in European countries including Germany, the U.K., France and Italy, Farhat Bengdara, the central bank governor who broke with Qaddafi’s regime, said in August.

Speaking in an interview yesterday, he remained upbeat about the country’s future, saying the transition may not take more than eight months.

Qaddafi’s death “will bring peace to Libya,” he said. “The financial situation in Libya is not excellent, but we hope that as soon as things clear and there is a new government that sanctions will be removed and oil will start to be exported,” he added, referring to the freeze that Western powers imposed on Libya’s assets after the revolt started.

Overseas Holdings

Libya’s holdings include 7.5 percent of the Turin-based Juventus soccer club; 2 percent of Finmeccanica SpA, Italy’s biggest defense company; and 3 percent of Pearson Plc, publisher of the Financial Times. Libyan investors own 7.2 percent of UniCredit SpA, Italy’s biggest bank, including a 4 percent stake held by Libya’s central bank, according to Bloomberg data.

Western governments have begun to lift sanctions on Libya’s frozen assets. The U.S. has released more than $700 million of the $1.5 billion that has been unfrozen to help the NTC pay for fuel and civilian needs, U.S. Secretary of State Hillary Clinton said Sept. 1. France has said it was releasing 1.5 billion euros ($2.1 billion). The United Nations Security Council on Aug. 30 approved Britain’s request to release $1.6 billion of Libyan assets held in U.K. banks.

Oil output rose to 350,000 barrels a day in October from 75,000 barrels a day in September, according to a report by the International Energy Agency this month. Libya may pump about 600,000 barrels a day of crude by the end of the year, compared with about 1.6 million barrels a day before the uprising, according to the report.

NTC Unity

Unity among NTC members and the emergence of a group of “well educated, urbanized, modern-background” officials that led the revolt may help with Libya’s transition, said Stefan Wolff, professor of international studies at Birmingham University in England.

Egypt, by contrast, didn’t “have a clean slate,” because elements of the former regime are still resisting change, he said.

Still, Qaddafi’s death in his coastal hometown of Sirte is unlikely to speed up the revival of Libya’s oil output because the country isn’t yet fully under control, a condition for oil companies to return, according to JBC Energy GmbH.

As in Egypt and Tunisia, the euphoria in Libya may be “premature,” said Shadi Hamid, director of research at the Brookings Doha Center in Qatar.

“In Libya everything is up for grabs,” he said in a telephone interview. “There is a lot of power to be had and if people want power they’re going to fight over it.”

--With assistance from Massoud A. Derhally in Beirut, Lebanon, Nicole Gaouette and Michelle Jamrisko in Washington, Arif Sharif and Ayesha Daya in Dubai, Andrew Davis in Rome and Peter S. Green in New York. Editors: Terry Atlas, Steven Komarow

To contact the reporters on this story: Alaa Shahine in Dubai at asalha@bloomberg.net; Ladane Nasseri in Tehran at lnasseri@bloomberg.net

To contact the editors responsible for this story: Claudia Maedler at cmaedler@bloomberg.net; Andrew J. Barden at barden@bloomberg.net


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