Libya politics: Much ado about BP

FROM THE ECONOMIST INTELLIGENCE UNIT

The sudden revival of interest from US legislators in the Lockerbie case is mainly about finding another stick with which to beat BP, but it also arises from the resentment at the circumstances of the release of Abdelbasit al-Megrahi from his Scottish jail last August. More broadly, it provides a reminder of the murkiness that surrounds any dealing with the Qadhafi regime, as well as reviving lingering doubts about the Lockerbie verdict itself.

The US Senate Foreign Relations Committee will hold a hearing on July 29th into Mr Megrahi’s release, which was approved by the Scottish government on compassionate grounds. The senators involved have said that they wish to find out about the interplay between the UK and Scottish governments and about the communications between the British government and BP in this matter. They have made clear that they hope that the process could result in Mr Megrahi being sent back to jail and in BP being prevented from proceeding with its contract to invest US$900m in oil and gas exploration in Libya. They have also urged the UK government to launch a formal inquiry.

Awkward questions

The Scottish first minister, Alex Salmond, has already set out in a letter to the committee the position of his government. He said that the decision to release Mr Megrahi was taken in good faith and according to due process, and that all of the relevant documents were in the public domain and have been exhaustively scrutinised. The only exceptions are letters from the US administration and from the UK government, where permission has been denied—the British prime minister, David Cameron, has since given instructions for the UK correspondence to be released. Mr Salmond said that his government had not received any representations from BP, but he did refer in his letter to a statement by the former UK foreign secretary, David Miliband in October 2009 (after Mr Megrahi’s release) saying that the British government had a “responsibility to consider” the damage that a Scottish decision to oblige Mr Megrahi to die in jail would have on the interests of UK nationals and companies, and, possibly on UK national security.

Mr Salmond’s letter makes clear that he does not think that the committee should spend much time going over the procedural and medical reasons behind Mr Megrahi’s release, as everything was above board and is easy to verify based on published documents. The senators may, nevertheless, be interested in questioning Kenny MacAskill, the Scottish justice secretary, who took the decision to release Mr Megrahi. One of the curious aspects of the case was Mr MacAskill’s decision to hold a private meeting with Mr Megrahi—something that he was not obliged to do—and Mr Megrahi’s decision, some days later to withdraw his request for a second appeal against his original conviction. The Scottish Criminal Cases Review Commission had ruled in 2007, after exhaustive deliberation that there were grounds for another appeal (the first one had been turned down by the High Court). The withdrawal of the appeal was not a condition for Mr Megrahi’s release on compassionate grounds, although it would have been required for him to return to Libya under the prisoner transfer agreement (PTA), which the Scottish government ruled out.

Behind closed doors

Mr MacAskill and the Scottish government can be expected to stick to their contention that the decision to release Mr Megrahi was based firmly on the independent medical opinion that had been sought, and that they were not influenced by any other consideration. Likewise, the British government is likely to reiterate its position that, while it was prepared to go to great lengths to develop good political and commercial relations with Libya after the lifting of sanctions, this had never extended to exercising pressure on the Scottish authorities in the Megrahi case. BP has already made clear that it had supported the signing of a PTA—motivated by concern to protect its commercial interests—but it has denied suggestions that it lobbied specifically for Mr Megrahi to be released. Jack Straw, the UK foreign secretary at the time, has acknowledged that he spoke with Mark Allen, a former diplomat who was retained as an adviser to BP on Middle East affairs, in late 2007. These conversations took place shortly before the UK government agreed not to exclude Mr Megrahi from the PTA, thereby opening the possibility that he could serve the remainder of his sentence in Libya, subject to the approval of the Scottish government. BP has indicated that its only concern was to ensure that the PTA was concluded in good time, and that it did not express a view about its substance.

It will be hard for the US senators, or indeed for a British inquiry, to dig out evidence of deals being struck to exchange Mr Megrahi for commercial contracts, whether they be with BP or with other UK companies. All of the parties concerned will have been careful to couch their concerns in general terms for the record, leaving their real import for interpretation.

Libya made no secret of its desire to secure Mr Megrahi’s release. Nevertheless, the events leading up to Mr Megrahi’s repatriation raise questions about the Qadhafi regime’s real agenda. There is enough in the Scottish review commission’s report to suggest that in a second appeal Mr Megrahi would have stood a reasonable chance of being found to have been the victim of a miscarriage of justice, specifically relating to his presence in the shop in Malta on the day that he was alleged to have purchased items found in the suitcase containing the bomb, the date of those purchases, and the basis for the shop’s owner picking Mr Megrahi out in an identification parade. At the same time, the commission expressed confidence in a stack of other evidence pointing to the involvement of the Libyan state—although this has not satisfied critics campaigning for an inquiry into the entire affair.

The Libyan government has officially acknowledged responsibility for the Lockerbie bombings (and for the bombing of a French airliner the following year) and has paid billions of dollars of compensation to the victims. However, Libyan officials have suggested that these moves were a pragmatic acceptance of what was necessary to secure the lifting of sanctions rather than a conclusive admission of guilt. The trial of Mr Megrahi and his Libyan co-defendant (who was acquitted) did not address the question of motive, nor did it consider the chain of command. The release and repatriation of Mr Megrahi means that there is now no judicial basis for examining these issues.

BP under the radar

The British government played a central role in getting sanctions on Libya lifted, in particular through helping Libya to certify the dismantlement of its nuclear weapons programme, after its existence was exposed in 2003.The links between the political relationship and commercial opportunities were highlighted in 2004 and in 2007 when visits to Libya by the former UK prime minister, Tony Blair, were accompanied by the conclusion of major oil and gas deals—the first was a gas deal with the Royal Dutch/Shell Group for a gas development that had been under negotiation for several years (and which was finally signed one year later), and the second was BP’s exploration and production contract.

BP had sat out the first two exploration bid rounds that Libya held after the 2003 lifting of sanctions, explaining its absence on the grounds that the competition was too hot. This explanation was plausible, as the winners of the new blocks had to accept extremely tough commercial terms. However, BP was simultaneously discussing its own deal, which first came to light in 2006, and was signed one year later by the company’s newly appointed chief executive, Tony Hayward, who described it as BP’s biggest ever exploration commitment. It covered 54,000 sq km in total, and encompassed two onshore zones and one deepwater offshore area. BP signed up to drill 17 exploration wells. It indicated that it was confident of discovering significant deposits of natural gas, with a chance of finding crude oil. BP and Libya’s National Oil Corporation (NOC) have confirmed that a rig is in place to start drilling the first offshore well; onshore drilling is set to commence later this year.

The terms that BP secured were broadly comparable to those agreed by other companies under the EPSA-IV bidding rounds, and there were no complaints that BP had gained any special treatment. BP’s lobbying of the British government over the PTA suggests that there was a political dimension to the deal, but this is not unusual in Libya. The Libyan political and economic system is opaque, and even powerful organisations like the NOC have to refer decisions up the line to authorities whose identity and precise powers remain obscure.

Without a thorough examination of the inner dynamics of the Libyan state and of the Qadhafi family, any investigation of the Megrahi release and related issues will only provide a partial picture. However, there is little chance of any senior regime figures co-operating in any investigation of this sort, and any government pushing such an agenda would undoubtedly handicap the prospects of its national companies conducting business with Libya.