Colonel Muammer Gaddafi’s embattled Libyan regime resorted to an escalating sell-off of the country’s gold reserves during its final months, according to the central bank and local gold traders, as it scrambled to survive a rebel uprising, Nato bombing and international financial sanctions, the FT reports. Qassim Azzuz, the new central bank governor, said the Gaddafi regime raised more than $1bn to pay salaries from trading 29 tonnes of gold with local traders in April, with the metal then possibly being taken out of the country for resale. The sell-off – which the victorious anti-Gaddafi opposition says consumed a fifth of the nation’s gold reserves – highlights the squeeze facing Col Gaddafi as the uprising grew and international sanctions took hold while raising the question of whether he used the money to directly fund his war effort. In the narrow Old City alleyways across the street from the central bank, jewellery shop owners said on Thursday that while the regime’s sales of the precious metal had indeed begun in about April it continued until the successful rebel uprising in Tripoli last month.
Muammer Gaddafi vowed to stage a “long fight” for control of Libya that would see it “engulfed in flames” as world leaders in Paris backed a new administration for the country, reports the FT. His message came as some 60 nations and international organisations gathered at a summit in Paris and recognised the right of the national transitional council, Libya’s interim rulers, to map out a constitution for the country in the aftermath of Col Gaddafi’s fall. It wasn’t all peace and love in Paris, however. Divisions have emerged over access to Libyan oil between countries that contributed to the war and those that did not, such as China and Russia, says the WSJ. The Telegraph alleges that oil trader turned junior minister Alan Duncan set up a “Libyan oil cell” inside the UK government to find ways of helping the Libyan rebels export oil. This paved the way for a deal between the rebels and commodities trading firm Vitol, a big donor to Alan Duncan’s private office in the past, according to the newspaper.
A dispute has erupted over control of Libya’s $65bn sovereign wealth fund, as the national transitional council attempts to maintain stability in the oil-rich nation, reports the FT. Several NTC members have contested the authority of Mahmoud Badi, who is probing corruption at the Libyan Investment Authority. Albudery Shariha, who was appointed senior director in the LIA’s legal department in July 2009, told the FT that Mohamed Layas would remain in charge of the fund. Mr Layas was chairman of the LIA before the revolution when it was controlled by Seif al-Islam, one of Colonel Muammer Gaddafi’s sons.
Rebels forced Muammar Gaddafi to abandon his Tripoli stronghold on Wednesday, reports Reuters, in what appeared to be a decisive blow against the Libyan leader’s 42-year rule. Gleeful rebels ransacked Gaddafi’s Bab al-Aziziya bastion, seizing weapons and smashing symbols of a government. The victory was by no means complete, however, says the NYT, as Col Gaddafi and his family could not be found and the rebels acknowledged that even the compound itself was not yet under their full control. The FT reports that Libya’s National Transitional Council will ask its international allies to release an initial $2.5bn in Libyan money during a conference in Doha on Wednesday, as the rebels who have all but ousted Colonel Muammar Gaddafi seek to shore up their tentative control of the country. The meeting takes place as Britain, France and the US begin pushing for a new UN Security Council resolution on Libya to secure international agreement to release about $100bn of Gaddafi regime assets frozen when the crisis began.
The China Flash PMI for August of 49.8 was met with relief today, even though it’s the second negative month in a row.
It’s that kind of scene now, however, when equity markets seem to be hoping for some kind of QE3 announcement at Jackson Hole on Friday even though a) it’s not an FOMC meeting, so Ben Bernanke can’t make a policy announcement, and b) things will need to get worse before purchasing Treasuries is back on the table. Read more
Col Muammer Gaddafi’s loyalists mounted a desperate defence of the Libyan strongman’s headquarters, even as rebel forces swept through Tripoli streets and world leaders called for an orderly transition to a new government, the FT reports. The rebels claimed to have taken control of the state television broadcaster and to have captured three of Col Gaddafi’s sons, on a day the Arab League, which first called for international intervention six months ago, labelled a “historic moment”. But on Tuesday one of the sons the rebels claimed to have in detention appeared in a Gaddafi stronghold in Tripoli, claiming that the rebels had fallen into a “trap’’ in the capital city. Seif al-Islam Gaddafi toured loyalist areas with reporters, and said his father remained in Tripoli. He did not comment on how he had escaped custody or indeed if he had ever been detained. Nevertheless, it is assumed Libya could return to the global oil market within weeks of a bonafide rebel victory, says the FT. Full resumption of output is months, if not years, away.
A son of Muammar Gaddafi who rebels said they had captured appeared with cheering supporters in Tripoli, says Reuters, giving a boost to forces loyal to the veteran leader trying to fight off insurgents who say they control most of the capital. Saif al-Islam, who has been seen as his father’s heir apparent, visited the Tripoli hotel where foreign journalists are staying to declare that the government was winning the battle against the rebels. The NY Times says the euphoria that followed the rebels’ triumphant march into the city had given way to confusion and in the immediate aftermath of the lightning invasion was a vacuum of power, with no cohesive rebel government in place and remnants of the Qaddafi government still in evidence. In the FT, consultants and industry executives say if the Gaddafi regime is conclusively defeated, Libya could be producing 300,000 b/d during the next three months from fields in the country’s east, which have been under rebel control since the start of the civil war, and the remote south-west desert. But ramping up output to pre-crisis levels would take years under the most benign scenario.
For the commute home,
- Why FT Alphaville has such sky-high productivity. Read more
It looks like a potential Libyan regime change is already beginning to affect oil prices on Monday:
Colonel Gaddafi’s grip on the Libyan capital has fallen away overnight, with loyal forces in control of only 15 per cent of Tripoli and his son in rebel custody, the FT reports. African countries are understood to be negotiating Gaddafi’s exile as rebels consolidate their control, according to Al Jazeera. While liberated oil refineries could reach up to 500,000 barrels a day within two months, Libya’s prized light sweet crude could take much longer to return to international markets and be priced into Brent crude, the WSJ reports. While economic fears have caused oil to fall in price far more precipitously than any effect from restored Libyan production, there is a much bigger lag in gasoline prices than usual, the WSJ adds.
Colonel Muammer Gaddafi’s 41-year rule over Libya was collapsing as rebel forces advanced deep into the capital, capturing his son, Seif al-Islam, the FT reports. As jubilant crowds filled Green Square at the heart of Tripoli on Sunday night, the rebels said they would grant safe passage to Col Gaddafi and his family if they agreed to leave the country, claiming he had called for talks with the leader of the National Transitional Council amid reports that his presidential guard surrendered to rebel forces. Initial resistance in the capital evaporated as rebel forces overwhelmed units loyal to Col Gaddafi. At least one other of Col Gaddafi’s sons was either arrested or handed himself over to rebel forces. Al-Jazeera English said the rebels met little resistance as they moved from the western outskirts into the capital. The NYT says the Gaddafi regime’s power dissolved with astonishing speed, with Tripoli residents raucously celebrating as rebels marched into the capital. Markets in Asia seemed to be responding to the news with “cautious optimism”, says the WSJ.
Oil prices dropped more than 7 per cent after western nations released the biggest amount of oil from their emergency strategic stocks since 1991, in a warning shot aimed at Opec, the oil producers’ cartel, the FT reports. The International Energy Agency agreed to release 60m barrels of oil in the coming month to offset the daily production loss of 1.5m barrels of high quality oil from Libya, the north African country engulfed in a civil war. The US led the release with its special petroleum reserve providing 50 per cent of the crude oil. Japan, Germany, France, Spain and Italy are providing most of the rest. The IEA said that it was in consultation with China, the world’s second-largest oil consumer, but declined to say whether Beijing would join the effort. FT Alphaville, meanwhile, asks if the move may have been intended as a substitute for quantitative easing? This is only the third time in the history of the IEA – set up in 1974 as a counterbalance to Opec after the Arab oil crisis – that there has been a release. The move has been triggered by western concerns about the impact of high crude prices on the economic recovery.
American and Saudi officials considered an arrangement to swap US reserves of sweet crude for the sour grades of Saudi Arabia in a bid to drive down oil prices before June’s Opec meeting, Reuters reports. The deal fell apart because of Saudi unwillingness to subsidise the US consumer by offering its oil below market prices, sources said. The initiative is nevertheless a striking sign of the Obama administration’s interest in using the Strategic Petroleum Reserve to combat supply problems in the oil market. Libya’s civil war has removed a significant source of high-quality sweet crude from European markets, with FT Alphaville covering other swap proposals as far back as February.
The SEC is examining transactions between Libya’s sovereign wealth fund and US banks including Goldman Sachs, the WSJ reports. SEC lawyers are reviewing a $50m payment Goldman proposed, but did not make, to the Libyan Investment Authority as part of a plan to recoup losses for the fund, sources said. The payment could still be considered a bribe under the Foreign Corrupt Practices Act despite never being completed. The government has aggressively enforced FCPA cases in recent years, particularly in the complicated nexus of Wall Street institutions, sovereign wealth funds, and third parties retained to strike deals between the two.
Saudi Arabia has been left isolated at Opec over its call to lift the oil cartel’s production target by 1.5 million barrels a day, the first such increase to supplies in four years, says Reuters. Whereas Gulf countries have offered support for the Saudi position, countries including Iran, Angola, Iraq and Venezuela are pressing for prices to remain above $100 a barrel, with key producers Nigeria and Algeria remaining on the sidelines. As Opec’s largest producer, Saudi Arabia still stands a good chance of getting its way as geopolitical problems continue to rock supply, especially in Libya, according to Bloomberg.
Société Générale structured a $1bn bet on its own shares for Libya’s sovereign wealth fund after suffering massive losses on the Jérôme Kerviel fraud, the FT has learnt. Documents show the transaction – the Libyan Investment Authority’s biggest investment in five years – had lost 72% of its value by mid-last year. The LIA entered into the transaction in early March 2008, barely a month after Kerviel’s €50bn of rogue trades left the bank with losses of €5bn. At the time, SocGen was struggling to plug a hole in its balance sheet. The case is one example of how top global financial groups did big business with Muammer Gaddafi’s Libya in deals that rarely benefited the country’s lumbering $65bn sovereign wealth fund, but generated lucrative fees for the banks. Goldman Sachs also engaged in large transactions with the LIA. The US bank structured a $1.2bn equity and currency derivatives portfolio that lost 98% of its value as of end-June 2010.
You’ve read the FT story – now see the document unearthed by Global Witness:
We’ll go through it later but needless to say, it confirms FT Alphaville’s worst fears about how badly the LIA mismanaged the Libyan people’s oil wealth… Read more
Libya’s sovereign wealth fund haemorrhaged billions of dollars as late as last year following disastrous investments in structured products, the FT reports. A report for managers of the Libyan Investment Authority dated June 30 said its bank and hedge fund investment products had fallen in value from about $5bn to roughly $3.5bn, out of the body’s total assets of $53.3bn. Three deals set up by SocGen had plunged from an initial value of $1.8bn to $1.05bn, the report said, with a $1bn Europe-focused product losing 43 per cent of its value in the preceding three months alone. The report also confirms large holdings of LIA cash in HSBC accounts, says the BBC’s Robert Peston. The revelations raise further questions about western involvement in the LIA, the assets of which have been frozen since the start of the Libyan civil war.
The US and UK are warning that Nato will increase airstrikes against Libya to levels not yet seen during the two month old conflict, as the pageantry of President Barack Obama’s state visit to the UK turns to issues of life and death, the FT reports. Speaking on a day when Nato aircraft carried out their most intensive attacks on Libyan targets to date, Ben Rhodes, Mr Obama’s deputy national security adviser, said Mr Obama and David Cameron, the UK prime minister, would make clear at a meeting at 10 Downing Street on Wednesday that the alliance would increase pressure on Col Gaddafi still further.
Having been proven right about their prediction of a rather substantial correction in commodities earlier this month, Goldman Sachs is now out with a new view.
A bullish view. Read more
Reuters published a special report Monday on the Libyan rebels’ efforts to sell oil in spite of the ongoing civil war and high levels of legal uncertainty.
The last time we posted on the topic, the rebels had sold 1m barrels with the help of Qatar but were struggling with both the supply and demand for further sales. Read more
Bern has frozen SFr830m ($960m) of assets of former heads of state from north Africa’s since the start of popular uprisings earlier this year, the FT reports, citing Micheline Calmy-Rey, Switzerland’s foreign minister. Calmy-Rey’s spokesman told Swiss news wires that the biggest single source, amounting to some SFr410m, stemmed from Hosni Mubarak, his family and immediate circle. A further SFr360m was identified as stemming from the Gaddafi regime in Libya. A further SFr60m in frozen funds were from Tunisia’s ex-president Zein al-Abidine Ben Ali and his family and immediate circle. Genevalunch, citing the WSJ, says that the Qadaffi assets in Switzerland are far smaller than the $30bn frozen by the US.
Reuters’ Jessica Donati and Emma Farge on Wednesday spot some odd goings-on in the Tunisian port of La Skhira:
Oil trading and shipping sources said at least 120,000 tones of gasoline had arrived so far this month at La Skhira for ship-to-ship transfers, a figure that amounts to nearly half of Tunisia’s annual imports. Read more
Opec countries do not need to increase oil output, with markets currently well-supplied, the organisation’s secretary-general has announced, according to the WSJ. Saudi offerings of blended crude designed to replace high-quality Libyan grades had not received buyers, Abdalla Salem El Badri added. Brent crude fell below $123 and US crude fell $1 to $108 on Monday, Reuters reports, with reports of Saudi cuts to production and forecasts of oil demand destruction continuing to sway the market from different directions.
Many associated with Col Gaddafi have been arrested, exiled or killed following the February revolution, writes the FT. But even as western backing grows for the rebels the purge is continuing and raising some uncomfortable issues for the Transitional National Council, the rebel leadership. The WSJ reports that the rebels made gains in its enclave of Misrata on Sunday with at least 17 people dead and scores more wounded in one of the bloodiest days of fighting since the Libyan uprising began.
Britain and France were rebuffed by a number of Nato states on Thursday as the two nations pleaded with alliance members to supply more combat aircraft for attack missions against Colonel Muammer Gaddafi’s ground forces, the FT reports. At a meeting of Nato foreign ministers in Berlin, the UK and France implored a range of countries – including Italy, Spain, the Netherlands, Sweden, Greece and Turkey – to provide aircraft that could conduct precision strikes on Col Gaddafi’s tanks and artillery. But in a development that triggered dismay at Britain’s Ministry of Defence, it emerged that none of these countries seemed likely to provide jets for these kinds of attacks on Col Gaddafi’s forces in the near future. Instead, the bulk of ground attacks on Col Gaddafi’s forces will continue to be conducted by the UK and France, with four other Nato members – Belgium, Canada, Denmark and Norway – carrying out a similar role.