Vladimir Putin Found Substitute for Algeria
// Russia invades Northern Africa via Libya
Today starts Vladimir Putin’s visit to Libya. It’s the first time in history that Russia’s President leaves on a visit to this country. An array of Russian officials and top-managers of the largest corporations will accompany Vladimir Putin. Moscow intends to make Tripoli its strategic ally in Northern Africa, and for the sake of it is ready to relieve Libya’s $4,6 bln debt in exchange for concluding arms and energy contracts. But Russia’s new attempt to consolidate its grip in this crucial region can be in vain.
Visit needed
According to a source in the Russian Foreign Office, till the last moment Vladimir Putin’s two-day visit to Libya, which begins today, was under threat of being called off. Similar situations have been common in the past years: Libyan leader Muammar al-Gaddafi invited President Putin to Libya right after his victory in the presidential election of 2000, but visits have been suspended. The previous one was called off last June.
This time nothing appears to impede the visit of the Russian President. It need be mentioned that quite an impressive delegation sets off for Tripoli with Vladimir Putin. According to the information of Kommersant, Russia’s Foreign Minister Sergei Lavrov, Finance Minister Alexei Kudrin, CEO of Gazprom Alexei Miller, head of Rosoboronexport Anatoly Isaikin and CEO of Russian Railways (RZD) Vladimir Yakunin are on the list of the delegates.
The major problem in the relations of Moscow and Tripoli is Libya’s indebtedness to the USSR for military supplies, which amounts to $4,6 bln according to the Finance Ministry. In its turn, the Libyan government brings its counter-claims: in the early 1990s Tripoli made a prepayment for military supplies via Russia’s Vnesheconombank, but the deal fell through because the UN imposed its sanctions on Libya 1992. Tripoli claims that Russia owes Libya $100 mln, whereas Russia’s Finance Ministry insists on $70 mln.
The return of munition (rocket system elements, an Ilyushin Il-76 plane and a submarine of the 641 “Badr” project), which was under repair in Russia, but was not given back because of the sanctions, is another bone of contention. According to the sources of Kommersant in Russia’s defence industry, Russia’s Federal Service for Military-Technical Cooperation argues that the machinery is worn out, and its depreciated cost can’t exceed $1 mln. In Tripoli’s estimate, the machinery is worth $500 mln.
Algerian variant
Negotiations were revitalized after Russia’s Foreign Minister Sergei Lavrov visited Tripoli last December, and an impressive delegation of the Finance Ministry – in March. As a result, the counterparts managed to negotiate the outlines of conflict settlement. According to the sources of Kommersant, familiar with the deal, Moscow was pressing for a scheme that envisaged complete debt relief in exchange for signing contracts on Libya’s purchase of Russian arms at the same price – a similar variant was implemented when addressing the issue of Algeria paying off its debt to Russia. Moscow suggested that the overall cost of the new military purchase be decreased by $300, which would resolve the problem of the non-returned Libya’s prepayment and munition. Under such conditions, Tripoli was to purchase Russian arms at the price of $4 bln within four years. But the Libyan negotiators asked to prolong the purchase period up to the year 2020. In the end Moscow conceded, fixing the overall debt sum at $4,6 bln.
Nevertheless obvious problems arose at the last moment. Russia’s Deputy Finance Minister Dmitry Pankin, who is in charge of the negotiations with Tripoli, stated Monday that it was not clear when the parties would come to an agreement on all the issues. “There is no mutual consent, and the views differ,” he said. According to the information of Kommersant, the money that Libya has to pay for Russian arms has become the bone of contention: Tripoli considers $4 bln a big sum, and its bid is $2,3 bln. As things stand now, these controversial matters are to be addressed by Vladimir Putin and Muammar al-Gaddafi.
At that, according to the sources of Kommersant in Russia’s defence industry, only preliminary talks have been conducted with Tripoli on a number of arms purchase issues. Last year Libya agreed to purchase four divisions of long-range surface-to-air missile systems S-300PMU-2 and some 20 short-range surface-to-air missile systems Tor-M1. The supply of 12 Sukhoi Su-35 fighters, 12 Mikoyan MiG-29SMT fighters, a consignment of Yakovlev Yak-130 training and combat fighters, and two Kamov Ka-52 helicopters, as well as the repair of two guard-ships and a small spacecraft, delivered earlier, was discussed during the preliminary talks. Libya showed its willingness to purchase a submarine type 636 as well.
According to the source of Kommersant, the details of possible contracts will be negotiated during the current visit. Nonetheless, the interlocutors of Kommersant with Rosoboronexport, acknowledging the complexity of the situation, claim that some contracts are sure to be signed. “It’s unlikely that the CEO is going to Libya as a mere tourist,” they assume.
Gas instead of arms
Russia has something to offer Libya besides arms. Unless the debt is relieved at the expense of the military contracts, the negotiators can turn to the energy industry. Experts stress that Libya can be of great interest to Russia in this sphere: since the sanctions were lifted 2004, there have been oil and gas fields development tenders in the country (Libya’s proved oil deposits exceed 5 bln tons, those of gas – 1,5 trln cu m). “Unlike Algeria, where practically all deposits are divided between western companies, Libya has recently opened for foreigners, and is of great interest to investors,” Valery Nesterov, analyst with Russia’s investment bank Troika Dialog, notes. He emphasizes that gas mining has been on the rise in Libya, and due to the lack of growth in home demand, the gas is expected to be exported to the EU markets.
So far Gazprom and Tatneft have been the only Russian companies to win tenders in Libya. 2006 Tatneft obtained four license blocks, and December, 2006 Gazprom won the tender of Block 64, with its oil deposits of 20 mln tons. Earlier the Russian monopoly gained 49,9% of two BASF concessions, where 5 mln tons of oil is mined annually.
Gazprom appears to have most extensive plans regarding Libya, which can be proved by the fact that the monopoly’s CEO, Alexei Miller, is going to Tripoli, according to Gazprom’s spokesperson Sergei Kupriyanov. With President Putin’s support, Mr Miller is likely to forge the realization of an agreement signed earlier with Libya’s National Oil Company, concerning the mining, transportation and processing of hydrocarbons, as well as Gazprom’s share-holding in it.
By the way, Gazprom can enter the Libyan market exchanging shares with Italy’s Eni energy company – the negotiations on the matter have been at full pelt. Eni owns 50% of the GreenStream gas-pipeline transmitting 6 bln cu m of gas per year. It connects two Libyan gas fields Vafa and Bahr es Salam on the Mediterranean shelf with Sicily. More to the point, the company owns 33,3% of shares with the Elephant oil field, whose proved deposits equal 68 mln tons, and four licenses on exploring and mining in the central provinces of Murzuq and Kufrah, as well as a share with the Marsa Al-Brega LNG (Liquified Natural Gas) plant in Central Libya, with its output of 3,2 mln tons per annum.
Yesterday Gazprom officials dropped hints that building a new gas-pipeline from Libya to Southern Europe was negotiated, which can attract the Libyan government. According to the information of Kommersant, share-holding of the parties is to be discussed in Tripoli.
A delay you can regret
Regardless of Moscow’s grand plans, experts opine that Vladimir Putin is a bit late with his visit to Libya. “After Tripoli improved its relations with the rest of the world, many western leaders visited Libya. Last year these were Toni Blair and Nicolas Sarkozy,” Alina Volkova, analyst with NCP Rosafroexpertiza, told Kommersant, “If Vladimir Putin’s visit were called off, plans for another one would have to be negotiated again, since no one in Tripoli knows Dmitry Medvedev.”
Nevertheless, Russia has already missed the opportunity to take part in dividing a lot of Libyan assets. For instance, Russian Railways (RZD) has been showing interest in Libya, but in February contracts on building two railway lines reaching 1,200 km (the project cost is $2,68 bln) were signed by Chinese Civil Engineering Company (CCEC). Now Russian Railways intends to participate in a tender on building the Sirt-Benghazi line of 550 km, but Russia’s bid of ˆ2,69 doesn’t suit the Libyan party: CCEC’s offers are far more favorable. According to Russian Railways’ spokesperson Alexandra Buratayeva, Vladimir Yakunin is going to Libya, for all that.
It seems that even if Moscow manages to sign a few beneficial contracts, it will hardly turn the country into its outpost in Northern Africa. “It’s no use staking on the country, which will be pulled in a thousand different directions,” Alina Volkova presumes, “Besides Libya has never had real allies: al-Gaddafi always chooses some and then plays upon their interests.”
Alexander Gabuyev, Konstantin Lantratov, Alexandra Gritskova, Natalya Grib
All the Article in Russian as of Apr. 16, 2008
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