Reconstruction after Gadhafi European Firms Hoping for Big Business in Libya

Berlin may have stayed out of the fight for Libya, but German companies hope to profit from its reconstruction. Several economic leaders have already visited the war-torn country to investigate business opportunities. But competition is fierce.

By and Katharina Pauli

An oil pipeline belonging to BASF subsidiary Wintershall in Libya: The company hopes the new rebel government will honor existing contracts.

An oil pipeline belonging to BASF subsidiary Wintershall in Libya: The company hopes the new rebel government will honor existing contracts.

The trip wasn't entirely without risk. Three weeks ago, Hans Meier-Ewert, head of the German-African Business Association, traveled to war-torn Libya together with representatives from 20 German companies. Just getting there presented the first challenge, with all regularly scheduled flights to Tripoli having been canceled long ago. The German government made a Transall military transport plane available for the journey, and the mission was headed up by Hans-Joachim Otto, a state secretary in the German Economics Ministry.

In Benghazi, where the rebel movement is headquartered, the group handed over aid goods and medical supplies to the city's hospitals. But the trip was far from just a humanitarian one. The Germans also met with representatives of the Libyan transitional council and of the country's central bank in an effort to pursue economic interests in the country.

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Graphic Gallery: Libya's Oil Industry
The war in Libya, of course, has not yet come to an end, and autocrat Moammar Gadhafi remains at large, likely hiding in a bunker somewhere in Tripoli. But companies from around the world, including several based in Germany, have already begun preparing for peacetime. Once reconstruction begins, business opportunities, they hope, will be plentiful -- and lucrative.

"Once oil and natural gas begin flowing again, Libya will be a rich country," says Meier-Ewert. The country is one of the world's largest producers of crude oil and has the largest proven reserves in all of Africa. The country's future government could conceivably finance reconstruction entirely from the billions of profits expected from oil sales.

Woefully Inadequate

Before that can happen, however, there is much that needs to be done. Although the country is rich relative to its African neighbors, its infrastructure is considered woefully inadequate. Indeed, says Felix Neugar, an expert on Africa with the German Chamber of Industry and Commerce (DIHK), Libya lags far behind the high standard of the large Gulf oil producers. Libyan infrastructure, he says, is more comparable to that of Syria or Egypt.

Economic associations estimate that between 30 and 50 German companies were active in Libya before the war. But it was a difficult country to do business in. State-owned companies dominated most markets, and legal standards were at best fluid under Gadhafi's leadership. Some companies are still waiting for payment for services rendered.

Now, though, companies are hopeful that the incoming government -- however it might ultimately look -- will provide better conditions for doing business. During the meeting in Benghazi with the transitional council, the German economic leaders were assured that the private economy would be strengthened, says Meier-Ewert. Contracts signed with the Gadhafi regime are to be honored, and many Libyans with extensive business experience are planning to return from exile, the German delegation was told. "They make a very good impression," says Meier-Ewert.

Still, the Germans aren't the only ones who have begun exploring opportunities in post-Gadhafi Libya. Indeed, some companies are taking substantial risks in order to get their foot in the door early. The Italian oil concern Eni, for example, is doing what it can to defend its status as the largest foreign oil producer in the country. Even before the rebels stormed the Gadhafi residence in Tripoli this week, Eni technicians had begun preparing to restart the flow of oil. And Eni has the full support of the government in Rome. Prime Minister Silvio Berlusconi is meeting with rebel leader Mahmoud Jibril on Thursday.

Pole Position for France

It is France, though, that could have the pole position when it comes to doing business with the new Libya. In March, Paris became the first Western capital to recognize the rebels' transitional council as Libya's legitimate government. Now Sarkozy hopes to not only profit from this, but also to set the tone for Libyan reconstruction. And he also has plans to meet with Jibril soon.

"Naturally it can be assumed that there will be a certain political gratitude," Meier-Ewert says.

That, though, could be bad news for German firms. When the United Nations Security Council passed a resolution in March to establish a no-fly zone over Libya, Germany was the only European Union member to abstain, joining Brazil, China, Russia and India.

Beijing, once an important economic partner to Gadhafi, is already feeling the rebels' anger. China wants to take part in the profitable reconstruction of Libya, but rebel leaders have threatened the country with the cancellation of oil contracts.

To stem retaliation from Libyan companies for Germany's reluctance to join the fight against Gadhafi, Foreign Minister Guido Westerwelle is already attempting to curry favor among the insurgents. "We will stand by Libya in word and deed should it be desired," he said. Meanwhile, Berlin has already promised the National Transitional Council €100 million ($144 million) in credit. There are also frozen Gadhafi assets in Germany worth €7.3 billion, which Westerwelle would like to release soon.

High Demand

"At least in the medium term, the German economy is unlikely to experience any disadvantages," says DIHK expert Neugart. "German-produced products and engineering capabilities are in demand. The important thing is that bids and contract awards are conducted with transparency and according to international standards."

Political stability and legal security are among the most important conditions for future business in Libya, economic experts say. Implementing these will determine how quickly, and to what extent, German companies return to the country.

Early this year, most companies withdrew their workers for security reasons. "Right now it is still too early to say when, how and under what conditions production can begin again in Libya," said BASF subsidiary Wintershall, an oil producer active in the country since 1958.

The war also interrupted the construction of a highway that the German firm STRABAG had been working on. This autumn, the company plans to send a team to Libya to assess the situation. RWE Dea, another German firm that drills for oil in Libya, hopes the new government will uphold existing contracts. In the end, raw material exploitation contributes to reconstruction, the company says.

But to pin down contracts with the transitional council, German companies won't have to travel far. The German-African Business Association is planning a large event in Berlin for businesses and charities, and members of the council have already pledged to attend. They are already in high demand.


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