Shokri Ghanem, the man in charge of Libya's highly corrupt oil industry during the last five years of Gaddafi's rule, was found dead yesterday – floating in the river Danube near his home in Vienna. His family have suggested that he fell in the river after suffering a heart attack, though foul play has not yet been ruled out.

Either way, his death will make it more difficult to uncover the whole truth about a series of oil-related scandals in Libya – including the unfolding Ras Lanuf refinery affair which I wrote about here just a few hours before Ghanem died.

Though Libya under Gaddafi was officially a "people's" state, its oil industry provided a wealth of opportunities for individuals and companies to cream off money that rightfully belonged to the people. For five years Ghanem was in charge of that industry, and whether or not he personally benefited from the corruption, he probably had more knowledge than anyone else of what was going on – so much so that on one occasion he expressed fears for the safety of himself and his family.

That knowledge may be one reason why Ghanem did not return to Libya after the fall of Gaddafi, even though he had defected from the regime last May during the uprising.

Ghanem's entry into Libyan politics was largely due to Gaddafi's son, Saif al-Islam. In the late 1990s, Ghanem was in Vienna, working for Opec when Saif arrived in the city (together with his pet tiger) to study for an MBA degree at the academically-suspect IMADEC business school. They struck up a friendship and in 2001 Saif persuaded his father to appoint Ghanem as Libya's economy minister.

Two years later, again at Saif's behest, Ghanem became secretary of the General People's Committee – in effect, prime minister – and with support from Saif embarked on a reform programme that included lifting state subsidies and partly privatising the socialist-style economic system.

This made him unpopular with the more traditional elements in the regime and in 2006 he was ousted from the prime ministerial role. Instead, the Colonel made him oil minister and he also took over as chairman of the state-owned oil company, NOC.

In 2009 he resigned his NOC chairmanship over what the Libya Herald describes as "differences with the rest of the government over oil policy" (though it seems he was eventually persuaded to return to the post).

According to a WikiLeaks document from 2008, one of the reasons for Ghanem's unhappiness was "attempts by al-Qadhafi's sons to use the NOC as a personal bank".

Ibrahim el-Meyet, a Tripoli-based lawyer and close friend of Ghanem, told John Godfrey, the US Chargé d'Affaires, that one of the Colonels sons – Muatassim (now dead) – had been demanding $1.2 billion from the NOC, either in cash or in oil shipments:

Ibrahim el-Meyet (strictly protect), a prominent Tripoli-based attorney and business consultant, told CDA on July 10 that Dr Shukri Ghanem, Chairman of Libya's National Oil Corporation (NOC) intends to tender his resignation to Muammar al-Qadhafi soon, perhaps as early as the coming week ...

El-Meyet said Ghanem felt compelled to resign because National Security Adviser Muatassim al-Qadhafi, a son of Muammar al-Qadhafi, had approached him in late June with a request for $1.2 billion. Muatassim suggested that if Ghanem could not quickly generate such a large sum in cash, he would be willing to accept oil allotments that he could sell privately as an alternative way to generated the funds. 

(Note: El-Meyet said other sons of al-Qadhafi (NFI) had recently levied demands for oil allotments that they could sell privately as well. End note.) 

Muatassim refused to say what the money would be used for, but el-Meyet said Ghanem had learned from another well-connected source that Muatassim intended to use some of the funds to establish a military/security unit akin to that of his younger brother, Khamis, and to defray the expense of unspecified "security upgrades" he wanted to make in his capacity as National Security Adviser. 

Ghanem informed Muammar al-Qadhafi in early July about Muatassim's request. Al-Qadhafi laughingly dismissed it and flatly told Ghanem to ignore it; however, according to el-Meyet, Ghanem is "genuinely concerned" that Muatassim or his confederates could seek revenge against Ghanem or his family if Muatassim does not receive the funds and/or learns that his father was informed of the request. 

The courtly el-Meyet was unusually blunt in assessing al-Qadhafi's children as "undisciplined thugs", noting that "no one can cross or refuse such people (the al-Qadhafi family) without suffering consequences, particularly when the matter is to do with money". 

In a long conversation with el-Meyet on July 5, Ghanem said that given the potential danger to him and his family stemming from Muatassim's request, he sees little choice but to resign. He had already drafted a letter of resignation and was waiting for al-Qadhafi to get through visits by Spanish Foreign Minister Moratinos (who was in town July 10) and the Union for the Mediterranean summit in Paris (on July 13) before submitting it. 

Around the same time, discussions were taking place about the future of Libya's laregst oil refinery at Ras Lanuf. In 2009 a deal was finalised which put the refinery in the hands of the newly-formed Libyan Emirati Refining Company (Lerco) – a partnership between the state-owned NOC and the Dubai-based Al Ghurair group.

As I mentioned in my blog post on Saturday, the deal was highly controversial at the time – it appears to have been financially disadvantageous to the Libyan state – though in an interview with Reuters last December Ghanem appeared to defend it.

The main complaints regarding the deal were:

1. That the refinery's assets were undervalued at the time of the deal with Al Ghurair;

2. That crude oil for refining was supplied too cheaply;

3. That Lerco was allowed to delay payments on its supplies of crude – in effect, getting a huge interest-free loan.

An internal Libyan government document, "The Annual Report by the Control Board for 2010" – copies of which were obtained by Reuters after the fall of Gaddafi – said that the NOC's accounts had failed to comply with "the state's fiscal law, the budget's bylaw and the accounts and warehouses bylaws".

One practice highlighted in the report was the use of post-dated contracts. This meant that purchasers of Libyan oil could benefit from price fluctuations and delay payment (thus, in effect, getting an interest-free loan). According to the report, such contracts "did not include terms and conditions aimed at guaranteeing the best price for NOC" and also "led to loss of interest for the public treasury and gain of the same for the clients".

Interviewed by Reuters last December, Ghanem said he had no knowledge of such contracts but argued that if they had indeed happened, the practice would not have been corrupt.

The documents also said that "millions of dollars in payments for oil had been erratic and difficult to trace," according to Reuters. "This was partly because multiple bank accounts had been opened in the NOC's name. On top of that, deals had been cut by individuals without authorisation." Reuters' summary continues:

"The Director of the Crude Oil Department used to sell instant shipments on his own and without referring to ... even his own superior officer," the report says. The crude oil manager at the time, Khaled Nashnoush, is also the signatory of at least one of the allegedly backdated contracts. He could not be reached for comment, and no one at the NOC could say where he is now.

Ghanem said it would be unreasonable to expect him to monitor the activities of all individuals. "Otherwise what is the point of having a head of department?"

There were plenty of other strange things going on, according to the documents. In 2008, for example, five million barrels of Libyan oil – worth around $500,000 – reportedly disappeared. In his interview with Reuters last year, Ghanem said he did not know about it and suggested the story had been made up by his enemies.
   

Muatassim Gaddafi: tried to use the national oil company as his personal bank

Posted by Brian Whitaker, 30 April 2012.