How to Mess up a Revolution? Add Oil and Stir

Oil can be a blessing or a curse for unstable nations.

Mar 19, 2014 at 10:03AM

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Following the popular uprising that saw the overthrow of the country's dictator, Libya had everything going for it. Or so many Libyans thought.

It had the natural resources to generate revenue needed to modernize the ageing and decaying infrastructure throughout the country. It had the workforce needed to carry out menial labor and could always import more from Egypt or its neighbors to the south, and it had hundreds of highly educated and skilled Libyans who had lived in Europe and in the United States who were willing to go back and help restructure the country. And it could call on experts from the West as required.

But that was until the very product that could solve the country's ills and save it from the fate of poorer countries to the south– oil -- became a prominent factor in the political and social upheaval currently affecting the country and dividing the Libyans to the point where the danger of civil war now looms on the close horizon.

Libya is a relatively small country with a small population of only about six million and large revenues collected from the huge oil reserves that the country has been blessed with. But is Libya's oil a blessing or a curse?  

Indeed that question begs to be asked, as oil is rapidly becoming a serious issue to contend with. Every party and group that took part in Libya's recent revolution, the one that finally got rid of Gadhaffi, now wants a piece of the pie.  

The answer is that oil at this point could be either a blessing or a curse, although the danger is that the leaning could be more toward a curse as opposing parties and militias all vying for a greater share of the oil revenues and all still carrying weapons are resorting to outright armed clashes that eventually could lead to an all-out civil war.

During the long decades of the dictator's rule, revenues from the country's vast oil and natural gas supplies have been wrongly used. Since Moammar Gadhaffi's revolution when the young colonel overthrew King Idris and declared the country a "Jamahiriya "--- a word that Gadhaffi created by combining the Arabic words for jumhuriya,  (republic) and jamaheer, (people, crowds, the public) – utilities and institutions needed by the public were greatly ignored and are today in dire need of updating.  

Indeed, besides filling up his and his family's personal bank accounts Gadhaffi spent billions of dollars on military hardware, such as tanks, hardware that the country did not need. At the time of the revolution Libya had 10 tank battalions.

According to the London-based International Institute for Strategic Studies, in 2009 it was estimated that Libya had 1,514 tanks. Of those, there were 181 Soviet-made T-72, 89 T-62, 494 T-55, 1,040 T-54.  Plus Libya had also purchased a number of Brazilian vehicles.

The total number of tanks placed Libya among the top five countries in terms of number of tanks at its disposal. What is not certain is just how many of those are still operational.

Furthermore, the former Libyan leader equipped each battalion with different tanks so that the parts and units could not be interchangeable.

A typical example of the mayhem that may follow in the weeks and months ahead – unless firm action is taken to curb the militias operating on the sidelines of the law, is the recent incident concerning the oil tanker Morning Glory.

As the vessel sailed close to Libyan territorial waters it turned off its transponder, thus becoming invisible to computers equipped with special software allowing the exact position of a vessel to be recognized. The Morning Glory entered the port of Es Sider, not at the invitation of Libya, but upon the demand of one of the key figures of the revolution, a certain Ibrahim Jathran, who had since become a militia leader and wanted to graduate from street fighter to oil tycoon.

Jathran, acting against the orders from Tripoli, filled the tanker with oil worth some US$33 million, a move that Deborah Jones, the US ambassador to Libya called "theft from the Libyan people."

But that is not the end of the story. On Monday night US Navy SEALS boarded the Morning Glory and arrested all on board. The Navy SEALS may have solved Libya's immediate problem, but let's hope the US Marines will not have to return to the shores of Tripoli.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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