The World's Biggest Heist: Raiding Libya's Sovereign Wealth Funds

By: EW News Desk Team   Date: 19 May 2011

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19 May 2011

The war against Libya wasn’t just about its estimated at 60 billion barrels of oil reserves; which are also the greatest in Africa and whose extraction costs are among the lowest in the world. Nor was it about the natural gas reserves of which are estimated at about 1,500 billion cubic meters.

The real Lybian goldmine: its sovereign wealth funds, capital that the Libyan state has invested abroad.

See the Slide Show >>> The World's Wealthiest Sovereign Funds

The Libyan Investment Authority (LIA) manages sovereign wealth funds estimated at about US$70 billion - rising to more than $150 billion if you include foreign investments of the Central Bank and other bodies.

And there might be even more.

When LIA was established in 2006, it had $40 billion at its disposal. In just five years, LIA has invested over one hundred companies in North Africa, Asia, Europe, the U.S. and South America: holding, banking, real estate, industries, oil companies and others.

In Italy, the main Libyan investments are those in UniCredit Bank (of which LIA and the Libyan Central Bank hold 7.5 percent), Finmeccanica (2 percent) and ENI (1 percent), these and other investments (including 7.5 percent of the Juventus Football Club) have a significance not as much economically (they amount to some $5.4 billion) as politically.

Libya, after Washington removed it from the blacklist of “rogue states,” has sought to carve out a space at the international level focusing on "diplomacy of sovereign wealth funds." Once the U.S. and the EU lifted the embargo in 2004 and the big oil companies returned to the country, Tripoli was able to maintain a trade surplus of about $30 billion per year which was used largely to make foreign investments.

The management of sovereign funds has however created a new mechanism of power and corruption in the hands of ministers and senior officials, which probably in part escaped the control of the Gadhafi himself: This is confirmed by the fact that, in 2009, he proposed that the 30 billion in oil revenues go "directly to the Libyan people." This aggravated the fractures within the Libyan government.

U.S. and European ruling circles focused on these funds, so that before carrying out a military attack on Libya to get their hands on its energy wealth, they took over the Libyan sovereign wealth funds.

On January 20 Layas informed the U.S. ambassador in Tripoli that LIA had deposited $32 billion in U.S. banks.

Five weeks later, on February 28, the U.S. Treasury “froze” these accounts.

According to official statements, this is "the largest sum ever blocked in the United States," which Washington held "in trust for the future of Libya." It will in fact serve as an injection of capital into the U.S. economy, which is more and more in debt. A few days later, the EU "froze" around 45 billion Euros of Libyan funds.

The assault on the Libyan sovereign wealth funds will have a particularly strong impact in Africa.

There, the Libyan Arab African Investment Company had invested in over 25 countries, 22 of them in sub-Saharan Africa, and was planning to increase the investments over the next five years, especially in mining, manufacturing, tourism and telecommunications. The Libyan investments have been crucial in the implementation of the first telecommunications satellite Rascom (Regional African Satellite Communications Organization), which entered into orbit in August 2010, allowing African countries to begin to become independent from the U.S. and European satellite networks, with an annual savings of hundreds of millions of dollars.

Story from Global Research

Check out the Corruption Perceptions Index, new on the EconomyWatch.com Economic Statistics Database.

The World's Wealthiest Sovereign Funds
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