Italy Could Bring Prosperity to the Mediterranean Nations
EDITOR'S CHOICE | 28.06.2015

Italy Could Bring Prosperity to the Mediterranean Nations

Henry Kissinger used to say that nations do not have permanent friends or enemies, only interests. And so goes the relationship between Italy and Libya affecting the region’s stability, economic growth, and peace.

The challenges facing Italy lean on the prospects of turning long-term ties with its southern neighbor into an opportunity to create Mediterranean stability, across North Africa and the Middle East. If monitored carefully, with a vision of peace and profit, it could end the stalemate of differing cultures and religions. Should dedicated politicians envision the potential for cross fertilization that can evolve with primarily Catholics and Muslims, the world would offer its praises again and again. If rendered a success, world religions will applaud repeatedly the courage of diverse backgrounds. And it will happen in the cause of “interests,” creating “win-win” situations for all. A long-standing myth is that you can only win, with a loss to another. Not true. Masterfully applied, both and all sides can benefit.

The two neighboring littoral nations (that part of the sea, lake, or river that is closest to the shore) where the model can work is born out of an historical tie of more than 100 years. Libya needs Italy, and Italy needs Libya. No other western country has stronger ties with Libya than Italy. They have enjoyed a privileged relationship for more than forty years. Trade has survived even the most acute political controversies. Yes, Italy wanted Libya’s oil and gas, but Libya needed Italy as their fundamental contributor to the stability of the “rentier state” based on the redistribution of oil income. (In political science and international relations theory, a “rentier state” is a state which derives all or a substantial portion of its national revenues from the rent of indigenous resources to external clients.)

Italy is the main importer of Libyan oil, and the income gained from it enabled Gaddafi to distribute it among the population, creating civil service jobs, pursuing a policy of state-controlled prices and establishing a system of subsidies for primary goods. Libya generates more than 90 percent of its revenues from gas and oil, making it possible to pay its troops, distribute money and import cash. In addition, ISIS hesitates to destroy the oil fields in Libya.

The historic connection began with the Italian colonization of Libya began in 1910, when coastal Tripolitania and Cyrenaica were conquered from the Ottoman Empire during the Italo-Turkish war. On October 3, 1911 Italy attacked Tripoli, arguing that it was liberating the Ottoman Wilayat from Istanbul’s rule. Their relationship flourished when the Ottoman sultan ceded Libya to the Italians by signing the 1912 Treaty of Lausanne. On October 25, 1920, the Italian government recognized Sheikh Sidi Idris as the hereditary head of the nomadic Senussi, as Emir of Cyrenaica, an invented title extended by the British at the end of World War I. In 1934, Italy chose to pursue imperial status, and created “Libya’ as the name of its colony.

Fighting would spread following the accession to power of Benito Mussolini. Starvation, murders, forced migration, disease, deportation would become active betrayals of the new dictator. Estimates are that 80,000 people perished.

Following the end of World War II, the Emir of Cyrenaica became King of the free Libyan state. At this time, there was no state which could guarantee petroleum-exploring firms the rights to what they might find. With the 1947 peace treaty, Italy relinquished all claims to Libya. Meanwhile, the Libyan economy had flourished, 2,400 miles of train track were built with Italian funds, and 2,400 miles of new roads spread across the country. Both nations established diplomatic relations in 1947.

Once Libya declared itself as an independent kingdom in 1951, mineral-rights relationships were arranged through international petroleum companies. By 1953, Libya granted prospecting permits to eleven petroleum firms. The government was determined to keep the market for exploratory permits in Libya and not grant a concession to one company or a consortium of several organizations.

Regulations demanded that oil firms would have to pay a 12.5 percent royalty on their revenues and a 50 percent tax on profits. Throughout, Libya remained an attractive investment primarily because it rested on the Mediterranean Sea, and at that time was believed to have a stable, pro-Western government.

It worked, and by 1959, six major oil fields were uncovered. The following year, Esso was convinced that it was now time to build a pipeline and export terminal. By 1961, Libyan oil shipment reached an astonishing seven million barrels. In 1967, as an example of prosperity, Occidental Oil brought in a well that produced forty thousand barrels each day. All would be disrupted, when in 1969 a group of military officers carried out a coup d’etat, deposing the king and shaking up the nation’s oil industry.

Throughout the following four-decades rule of Muammar Gaddafi, Italy, more than any other European country, maintained close ties with Libya, purchasing a significant quantity of its oil. Libya possesses the largest proven oil reserves in Africa, and for more than 60 years, since the founding of its powerhouse ENI, Italy has led the way in exploiting these resources. Libya’s hydrocarbons account for more than 60 percent of GDP and a whopping 95 percent of its revenues. Her crude oil is abundant and generally light and sweet, that is, low on density and sulfur, a favorable formula for importers. This prize to Italy benefited all.

ENI (formerly Azienda Generale Italiana Petroli [AGIP]) at one time imported an average of 550 thousand barrels per day from its southern partner, and planned to invest $25 billion in their extensive oil operations throughout Libya. Over the past decades, Italy has relied on Libya for 25 percent of its oil and gas needs. France, Switzerland, Ireland and Austria received 15 percent of their oil imports from Libya.

While Libya was declared a pariah by most of the international community under Gaddafi’s domination, Italy maintained close diplomatic relations with Libya, continuing to receive large quantities of oil from its southern neighbor. Following the 1988 Pan Am jet bombing, US and British oil firms withdrew from Libya while ENI was rewarded with more oil contracts by Gaddafi for ignoring Libya’s alleged role in the incident. Gaddafi’s government owned an estimated 49 billion Euros in the Italian stock market, including 7.5 percent of Italy’s largest bank Unicredit and 2% of ENI.

Relations between the two nations warmed in the first decade of the 21st century, when they entered cooperative arrangements dealing with illegal immigration into Italy. Libya agreed to aggressively prevent migrants from using the nation as a transit route to Italy, in return for foreign aid with Italy’s successful attempts to have the European Union lift its trade sanctions on Libya—another strategic play by the government.

In 2009, Gaddafi visited Italy for the first time in his 40-year rule. At the end of August 2010, Colonel Gaddafi was honorably welcomed by the Italian Prime Minister, Silvio Berlusconi to celebrate the tenth anniversary of the signing of the Treaty of Friendship.

Rome continued to support Gaddafi as most of Europe opposed his regime. On the international scene, Rome proposed itself as a privileged European partner of Libya. Italy felt itself marginalized by Europe and rapidly found that it had lost its leverage with Libya. The hope of becoming the international mediator was disappearing. Losing its influence, Rome took action to protect its strategic interests as best it could and finally went to war against Gaddafi. The Italian government jumped ship and became fully involved in NATO’s operations. With the death of Gaddafi, Italy recognized the National Transitional Council as the government of Libya. Italy’s role now was to stabilize Libya—no easy task. As Libya was now surviving without Gaddafi, the Arab Spring followed. Italy was forced to turn its back on Libya, siding with its European allies.

On September 26, 2011, ENI announced it had restarted oil production in Libya for the first time since the beginning of the 2011 Libyan civil war, reflecting positive relations. The disruptions of recent years continue to harm both Libya and Italy, as well as other European nations.

Four years after an international coalition intervened to force the overthrow of Gaddafi, Italy’s government pressed for new military intervention. In 2014, Libya became more divided. Fighting between rival militias displaced hundreds of thousands of people. The internationally recognized government fled the capital to the eastern city of Tobruk, with a rival authority springing up in the capital. Both sides remained, supported by outside planners. Oil facilities would become a bargaining chip for militias and their political backers.

In February, 2015, ISIS suddenly released a video showing the beheading of 21 Egyptian Coptic Christians. “Today, we are on the south of Rome, on the land of Islam, Libya….We will conquer Rome, by Allah’s permission, the promise of our Prophet, peace be upon him,” ISIS vowed in the video. Tensions grew.

By March 2015, Rome was urging support from the public to confront the rising influence of Islamist militias, and the threat to its oil and business interests. The Italian Defense Minister Pinnotti declared that a military mission in Libya was “urgently required” and would send 5,000 troops to Libya. The day prior all diplomatic personnel were withdrawn from Tripoli.

Italy remains one of the few European nations which still has an embassy in Libya. As ISIS and other rival groups continue their conflict, Libya’s crude output has been reduced to 352,000 barrels a day. Historically, Italy and Libya’s long term cozy relationship faltered as billions of dollars in oil profits were caught in the crossfire.

By mid-April, as Libya faced disintegration, an optimistic choice of unity was being considered calling for unconditional negotiations and reciprocal concessions. Public payroll costs had tripled to $24 billion in 2014 from $8 billion in 2011. The 2015 deficit was more than $40 billion, quickly burning through its foreign reserves of about $90 billion. Oil output was down to some 500,000 barrels a day, from as much as 1.7 million at its peak. Nevertheless, its sales are the only thing keeping the country afloat.

Today, only stability and cessation of violence will make it possible to reinstate Italy’s potential role as both arbiter and negotiator between the European Union and the Arab world. Other North African and Middle East nations are watching the unfolding of events. In addition, the coordinated effort to control illegal immigration from across the Sea will define any future unity of the E.U.

Each year, for the past fourteen years, I have spent lecturing at Italian universities attempting to encourage their government and other officials to develop a master plan for the gradual evolution of a more integrated economic community across the Middle East to encourage greater job creation and cross border trade. To be considered would be a reinvented and modified multinational Marshall Plan to advance the process.

Italy could take a dramatic leadership position in forging a North African and Middle East economic arena, based on her historic and continuing relationship with the region.

No other nation has so much invested in the area and increasingly, no other nation can influence the Arab world in seeking ways to stabilize the region by strengthening bonds of cross border cooperation than the government in Rome.

There are potential barriers facing any EU member nation in attempting to conduct trade accords outside the jurisdiction of the European Union. As defined by rules and regulations, no individual member country can negotiate such agreements with outside nations without the express consent of the Commission. Nevertheless, an Italian leadership role could be critical.

Working with the GCC

Alternatively, Italy can redirect its efforts by working closely with the Gulf Cooperation Council (GCC) to secure their support. Officially, the Cooperation Council for the Arab States of the Gulf was created on May 25,1981. Members are Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates. There are also discussions regarding future membership of Jordan, Morocco, and Yemen. On November 11, 1981, a unified economic agreement between the nations of GCC was signed. A common market was launched on January 1, 2008 with plans to realize a fully integrated single market with the free movement of goods and services. The creation of a customs union began in 2003 and became operational on January 1, 2015.

Possible Models for Consideration

A. Italy takes the initiative by leading the way to enforce the Barcelona Process, launched in November 1995 with its then-15 EU nations and 12 Mediterranean partners. Its aim is to establish a common area of peace, stability and prosperity in the Mediterranean. The intention is to generate an area of shared affluence through the gradual development of a free trade area. Its declared hope is to implement appropriate economic cooperation to be funded by the EU’s financial assistance to its partners.

B. Primary concentration would include investment and internal savings, industrial Cooperation and support for small and medium-sized enterprises, environmental cooperation, dialogue and cooperation in the energy sector, cooperation in the area of water-resource management, and modernization and reform of agriculture.

C. Working with the target nations, Italy would implement the “Union of the Mediterranean,” an initiative launched by French President Nicolas Sarkozy in the Fall of 2007. This Union, by design, builds on the Barcelona Process. It is a multilateral partnership of 43 nations. Created in July 2008 as a relaunched Euro-Mediterranean Partnership when a plan to create an autonomous Mediterranean Union was dropped.

D. The Euro-Mediterranean Partnership is implemented, to encourage the free movement of goods, services and capital, originally scheduled to commence in 2010. The Partnership calls for a progressive liberalization of trade in agricultural products by reciprocating preferential access to their respective markets. Today, the Partnership comprises 39 members, 27 European Union members states, 3 candidate states: Croatia, Macedonia and Turkey. Its 9 Mediterranean partners are Algeria, Egypt, Israel, Jordan, Lebanon, Morocco, the Palestinian Authority, Syria and Tunisia. Libya has had observer status since 1999.

E. Italy encourages or leads the United Nations Economic Commission (formed in 1947) to promote greater economic integration and cooperation among the nations by urging sustainable development and economic prosperity. Interregional cooperation, accountability and transparency play a major role in this activity. It has 56 member states. Its Committee on Economic Cooperation and Integration promotes a policy, financial and regulatory environment conducive to economic growth, innovative development and higher competitiveness in the region, focusing mainly on countries with economies in transition.

F. The model of economic integration in the European Union, should be studied and, in areas where it is appropriate, adapted for nations across the Mediterranean. The procedures and challenges can by found by studying my book Aftermath of the Arab Uprising: The Rebirth of the Middle East which brings forth concepts of a reinvented Marshall Plan for the region and the structural and administrative means for implementing an eventual economic community of nations.

Ultimately, under Italy’s primary leadership, a new dawn is possible. Once the ravages, chaos, mistrusts, and distress are controlled, and Libya’s civil strife is retained, the process can be fully activated. Along with E.U. support, Italian know-how and her experience of 100 years with Libya, this rebirth can spread across the 26 States. The rewards for Italy are numerous as it will be for nations of the Mediterranean Sea.

Jerry M. Rosenberg, foreignpolicyjournal.com

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