Tag Archives: Libya

China Seeks Compensation For War-Damaged Libyan Projects

The hopes of Chinese civil engineering firms that they would be able to return to abandoned construction projects in Libya appear to have been dashed for now. Commerce minister Chen Deming says it is too dangerous to return, and that China is seeking compensation from the new government in Tripoli, particularly for housing projects worth more than $10 billion that were completed or close to completion but suffered heavy artillery damage during the fighting.

Before the civil war that overthrew the Gaddafi regime started in February, 2011, some 75 Chinese companies, including 13 large state owned enterprises, were working on $19 billion worth of projects, mainly in oil services, railways, housing construction and telecoms. Evacuating more than 35,000 Chinese nationals from these in March last year was a source of some pride in Beijing. (A similar, though more-low profile and pre-emptive evacuation of Chinese workers in Syria is now underway, with 100 or so being left in the country to secure Chinese engineering projects as far as they can, and so minimize the sort of damage suffered in Libya.)

Chen’s comments about Libya followed the visit of an inspection team from his ministry that arrived in Tripoli earlier this month to assess the extent of the damage, and the prospects for Chinese engineering companies to return. China has, though, resumed its oil imports from Libya, which were interrupted by the civil war. It is expected to ship 140,000 barrels a day from Libya this year.

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China’s Return To Libya

China had commercial interests in Gaddafi’s Libya and will pragmatically rebuild its presence in the country once the end-game of the overthrow of the colonel has played out. Before the civil war started, some 75 Chinese companies, including 13 large state owned enterprises, were working on $19 billion worth of projects, mainly in oil services, railways, housing construction and telecoms. Evacuating more than 35,000 Chinese nationals from these in March was a source of some pride in Beijing.

What they left behind was contract work so there would have been billions of yuan of business losses and damage to work camps. The three big oil SOEs, CNPC, Sinopec and CNOOC, all had engineering projects in Libya, but no oil production. China was buying oil from Libya, not extracting and shipping it. China gets 3% of its oil from the country, a significant if not critical supply (and accounting for about 10% of Libya’s exports).

Some within the new Libyan leadership have suggested that China could be punished for backing the Gadaffi regime. In response, China has urged the new leadership to protect its interests in the country and promising “to play an active role in future reconstruction” under the aegis of the U.N. Wen Zhongliang, deputy head of the trade department in the Ministry of Commerce, says “we hope to continue investment and economic cooperation with Libya…China’s investment in Libya, especially its oil investment, is one aspect of mutual economic cooperation between China and Libya.”

China, along with Russia and Brazil, which also neither supported NATO airstrikes against Libya nor provided the anti-Gaddafi forces with military aid, will be attending the Libya reconstruction conference being convened in Paris by French president Nicholas Sarkozy on Sept. 1. “It is true that some Chinese companies are considering exploring opportunities or resuming their business in Libya, but the time is far from ripe, as there are still short-term risks,” Xie Yajing of the Commerce Ministry’s west Asian and African affairs department told the China Daily. Beijing has yet to officially recognize the Transitional National Council (TNC) as Libya’s government, though it is signaling that that will come, and it has maintained back-channel contacts with the TNC throughout the conflict.

Beijing has a lot of experience in operating in politically volatile parts of the world. It knows how to change horses, as it has shown in post-Saddam Hussein Iraq.

Update:  Representatives of the Gaddafi regime visited three Chinese state-owned arms manufacturers in July, long after the imposition of UN sanctions on Libya, China’s foreign ministry spokesman has confirmed, but neither contracts were signed nor any arms shipped, she said. The firms involved are China North Industries Corp. (Norinco), China National Precision Machinery Import & Export Corp. (CPMIC) and China XinXing Import & Export Corp.

Leaders of the National Transitional Council in Libya say that they have evidence that other shipments of weapons were made. “We found several documents that showed us orders, very large orders, of arms and ammunition specifically from China, and now we do know that some of the things that were on the list are here on the ground, and they came in over the last two to six months,” according to Abdul Rahman Busin, NTC’s military spokesman.

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From Tripoli To Pyongyang

Our man in New York sends word of a passage that caught his eye in a critical analysis by Daily Beast/Newsweek journalists Christopher Dickey and John Barry of U.S. President Barack Obama’s flailing Middle East policy:

A former U.S. ambassador says he’s heard that the North Koreans are telling the Chinese “if this is the best the Americans can do in Libya, we’ve got nothing to worry about.”

That does not sound good. And we rather suspect we know how the Chinese side would have replied.

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Maintaining China’s No-Dissent Zone

“Turmoil in Libya worsens as West launches attack” is Xinhua’s headline in the wake of the French, American and British air strikes to enforce the U.N.-sanctioned no-fly zone in Libya. Its reports play up the civilian casualties announced by the Libyan government and accredited a variety of self-serving motives to the leaders of each Western country involved. China, along with Russia, did not veto the resolution when it was before the U.N. Security Council, but abstained from voting and it would have been aware of the consequences of that. Nonetheless, the foreign ministry issued a statement today expressing its regret over the military strikes and saying it did not “agree with resorting to force in international relations”.

While China also has its own business interests in Libya, Beijing has a fine diplomatic line to walk. As it starts to take a greater role on the global stage, it has to balance maintaining its position as an alternative to the West with not being seen as a backer of dictators that massacre their own people. Even more important, this Bystander believes, is how the perception of the Libyan crisis as a proxy for the wider dissent against authoritarian regimes being seen across the Arab world is managed domestically. We expect to see state media repeatedly connect the dots between dissent and turmoil.

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Adding Up The Business Cost In Libya

Beijing has now evacuated all Chinese nationals from the chaos of Libya, 35,860 people including Taiwanese, according to the foreign ministry. What is left behind is what looks like adding up to billions of yuan in business losses not just from the cost of evacuating staff but also from damaged property and disrupted contracts.

Most if not all of the 13 state-owned companies operating in the country have had facilities looted or destroyed. The commerce ministry has said 27 Chinese construction sites and work camps had been attacked in the first days of the unrest. Having evacuated all its employees, China Railway Construction Corp. has suspended its 28 billion yuan ($4.2 billion) of contracts, as has China State Construction Engineering Corp., which has 9 billion yuan of active construction contracts in Libya, and China Gezhouba Group which has 5.5 billion yuan of housing building contracts. China National Petroleum Corp., which has services and exploration but not extraction operations in Libya and whose facilities are among those that have come under attack, has also stopped all work there.

In all, 75 Chinese companies had been operating in Libya, mostly in the energy and construction industries. They signed a reported combined $1.8 billion of new contracts last year, which will be most at risk from disruption. The commerce ministry and the agency responsible for state-owned enterprises say the are toting up the losses incurred by the SOEs. With China’s off-shore construction and natural-resources businesses giving no indication that events in Libya are diminishing their intention to work in some of the most politically volatile parts of the world, these may be regarded as no more than a necessary, if hopefully infrequent, cost of doing business there.

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China’s Navy, Unusually, Sails Forth

A necessary but not sufficient condition of being a superpower is not just the possession of power but also the ability to deploy it around the world. This week a Chinese warship was in the Mediterranean. PLA Navy ships have been in those waters before on goodwill visits but not on active duty. Now, one swallow does not a summer make. The 4,000 ton missile carrying 054A class frigate, the Xuzhou, seen above in April last year during a naval parade off Qingdao, was on a humanitarian mission to evacuate Chinese nationals from civil war-stricken Libya and had been redeployed from international anti-piracy patrols off the coast of Somalia.

Yet those patrols in turn are the first deployment of a PLA Navy group of warships outside of China’s regional waters. We imagine it was no coincidence that one of the navy’s most modern missile carrying frigates was deputed to the evacuation task. It is equally notable that a Chinese warship can enter these waters without causing alarums and excursions, a testament to the general lack of global military deployment of the country’s military power hitherto. And there is no doubt that Beijing’s swift evacuation of its citizens from Libya is driven by domestic political concerns rather than any about its international standing. Yet every journey of a thousand miles starts with a single step.

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CNPC Confirms Attacks On Libyan Operations

China National Petroleum Corp. has confirmed that its facilities in Libya have come under attack. CNPC says that it has repatriated a first group of 24 its 391 Chinese staff across its five facilities in the country. CNPC did not give details of the attacks, which are among many being reported on Chinese owned business operations in the country. As of Thursday, the company says, 47 of its staff have been evacuated.

CNPC has been working in Libya since 2002 when it won a pipeline construction contract to take oil and natural gas from a desert field 1,000 kilometers inland to the coastal terminal at Mellitah. In 2005, the company signed an offshore exploration contract with Libya’s National Oil Corporation. It also provides oilfield services and engineering and construction services to other multinational oil companies working in Libya. It is not, however, an oil producer there. (Sinopec buys 6 million barrels of crude a month from Libya, the backbone of the $6.6 billion a year in two-way trade between the countries.)

In all, Xinhua says, China has so far evacuated 4,600 of its 30,000 nationals working in Libya, mostly in energy and construction. The operation is being said to be the country’s largest overseas civilian evacuation and is being seen as a test of the competence of the government to protect its citizens abroad, tens of thousands of whom now work in politically volatile countries around the world.

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