Russia’s firms stand to lose billions of dollars of deals in the new Libya, especially in the arms industry, after refusing to side with rebels in the battle with its old ally Muammar Gaddafi.
The Kremlin has refused to join Western powers in celebrating the rapid sweep into Tripoli by Nato-backed rebels and has also shown no sign of recognising the National Transitional Council as the legitimate authorities.
But such caution – a traditional hallmark of Russian foreign policy – may prove damaging from Russia in a new Libyan order that remembers who its friends were at times of bitter war.
“Those who risked their reputations, money and armed forces by actively supporting the opposition will expect to get everything first,” Russia in Global Affairs editor Fyodor Lukyanov said.
“We cannot rely on their (the rebels’) good will,” said Mr Lukyanov.
National Transitional Council chairman Mustafa Abdel Jalil has promised to favour the countries that helped the rebels, saying “we will deal with them according to the support which they gave us”.
Moscow abstained in the UN Security Council no-fly zone resolution that allowed the western air campaign in Libya to go ahead, but then spent the next months loftily criticising its partners for exceeding their mandate.
Russia had cultivated ties with Col Gaddafi since the Soviet era and joined the international stampede to the country’s energy riches once he unexpectedly renounced weapons of mass destruction in 2003. The strategy involved massive arms sales that Col Gaddafi could pay off through contracts to develop energy deposits and a rail link between Tripoli and what became the rebel capital in Benghazi.
The firms involved told AFP that all of those contracts are now frozen. While the railway contracts still appear realistic, Russia faces a tough time in presenting itself as a credible energy partner and the military deals look beyond repair.
“We may be able to settle things with the gas contracts once there is an actual government in place and no more fighting,” said Institute of Strategic Assessments analyst Alexander Konovalov. “But things are really bad where the arms deals are concerned,” the analyst added. “We forgave Gaddafi billions of dollars in debt in the hopes of him purchasing more weapons.”
Russian generals have estimated $4 billion in lost arms contracts from the rebels’ rise to power and their expected decision to rely on Nato equipment and support.
Libya in 2010 signed a new $1.8 billion arms agreement after seeing most of its old debts written off and was expected to become the first buyer of Russia’s new Su-35 fighter under another new deal worth $800 million.
“We are losing these prospects,” said US and Canada Institute analyst Viktor Kremenyuk.
“But at the same time, we are not losing money for things we already delivered,” he added.
The Russian Railways company said it has invested about $350 million into a rail development project worth $3.1 billion and set for completion in 2013.
“We expect work on this contract to resume once the leadership is in place,” a Russian Railways spokeswoman said. The new government would probably like to see rail laid quickly between the two coastal cities. Energy behemoth Gazprom holds both oil and natural gas licences and was in the process of acquiring one more from Italy’s ENI when the war broke out.
The western companies Gaz-prom is competing against also have strong interests in Russia and have been previously keen to maintain friendly ties with the Kremlin.
What worries some energy insiders is that their contracts depended entirely on the whim of the ousted Libyan leader.
“Their high-placed officials kept getting replaced and everything had to be settled with Gaddafi himself,” an unnamed Russian oil executive told the Vedomosti business daily.
“All the Russian companies did that. It looks like all the contracts agreed with Gaddafi will be annulled just like they were in Iraq,” the oil executive said.