Libya has a small population and lots of oil and gas. If properly managed, these resources could help transform the fortunes of its citizens and bring much-needed peace and stability to the country.
Colonel Gaddafi’s stranglehold on Libya’s oil sector helped to keep him in power for 42 years and finance the recent civil war. This persistent abuse of national assets for personal gain was a key driver of the revolution which has resulted in a new ruling regime in Libya.
The move into the post-Gaddafi era presents the new Libyan government and supporting countries with an unprecedented opportunity to build transparency mechanisms into Libya’s oil sector from the outset. Furthermore, companies, governments and banks all over the world must learn the lessons of the Arab Spring, which has underlined how a lack of transparency in the management of resource revenues helps keeps dictators in power, and creates the conditions for new ones to emerge.
The immediate establishment of prudent management and financial responsibility in Libya’s oil sector would mean citizens could know how their country’s oil wealth is being used and by whom, and would promote efforts to use it to foster peace and drive development.
It’s crucial that these systems are put in place as a matter of urgency and before any election is held or new extraction contracts are agreed.
A lack of transparency is what allowed Gaddafi to exert such control over Libya’s oil sector, and what enabled the collusion of foreign companies and banks in his doing so. Client confidentiality rules and poor monitoring of customers with access to state funds make it too easy for corrupt dictators to hide their loot in the international financial system. In May 2011 Global Witness published a leaked document detailing $65bn worth of investments held by the Libyan sovereign wealth fund, the Libyan Investment Authority. According to the document HSBC, Société Générale and Goldman Sachs were among the key western bankers for Colonel Gaddafi’s regime.
Global Witness is calling on governments to force banks to declare what state assets they hold, and to tighten regulation of how banks monitor customers who are senior politicians.
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