Libyan petrodollars and the overthrow of Gaddafi

Libyan petrodollars and the overthrow of Gaddafi

A speculative blog on the NATO-backed overthrow of Libyan dictator Col Gaddafi, looking at whether Gaddafi's refusal to recycle petrodollars through US banks was a factor.

Please read the following as a thesis, as there is not enough evidence to suggest it is an accurate summary of events

Before the NATO led destruction of the Libyan state in 2011, the Libyan Investment Authority was sitting on some $60-70 billion worth of petrodollars. Petrodollars, since the 1973 OPEC crisis, have been (through threat of force) recycled through New York investment banks. David Harvey writes of the 1973 OPEC crisis in, A Brief History of Neoliberalism,

We now know from British intelligence reports that the US was actively preparing to invade [OPEC] countries to restore the flow of oil and bring down oil prices. We also know that the Saudis agreed at that time, presumably under military pressure if not open threat from the US, to recycle all of their petrodollars through the New York investment banks.

Under the Gaddafi regime Libya had attempted investment in New York investment banks, namely through two multi-billion dollar investments during the mid 2000s with Goldman Sachs. The investments were complete failures, and Gaddafi was possibly defrauded by Goldman Sachs. In short, Gaddafi was done with his experiment investing in the New York investment banks. This was most likely quite irksome to Washington DC and New York policy makers as at the time of the 2011 NATO attack not only was Libya awash in petrodollars, but it was all of a sudden becoming a rather serious international player. It had become the majority shareholder in Bahrain’s largest bank, the Arab Banking Corporation and a high level confidant of Gaddafi, Muhammad Layas, became chairman of the Board of Directors. The Bahraini banking sector is very powerful and is a hub for the flow of petrodollars. The Arab Banking Corporation “provides off-shore investment banking, and project finance services to the rest of the region.” All of a sudden not only was Gaddafi not planning on recycling his massive funds through U.S. investment banks, but he was making plays to ensure that funds from the Bahraini banking sector, and therefore Saudi petrodollars, would not either. Gaddafi might be more inclined to encourage petrodollars to flow to other powerful countries, and as the 1973 OPEC crisis showed, a major shift in the direction of petrodollars can drastically affect the world economy. Suddenly the situation had become a major threat to U.S. hegemony. The solution was simple, get rid of Gaddafi. An opportunity presented itself with the Libyan Civil War in 2011, and the U.S. hopped on board. However, the problem was that the alternative to Gaddafi was support for a hodgepodge of militias, some of them openly tied to Al-Qaeda or Al-Qaeda type jihadi groups. These groups would end up being responsible for the killing of U.S. ambassador Chris Stevens. It seems that the U.S. has yet again used jihadi groups to destroy a perceived threat to its hegemony, just as a mayor of a city will sell off city assets to stop a short term budget shortfall from affecting major city services thereby fixing the short term problem but creating long term ones possibly even more volatile.

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Jan 2 2015 10:21


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Jan 4 2015 06:10

This conspiratorial view of the situation is reasonable to suggest. David Harvey suggests that New York hedge funds conspired with the IMF/US Treasury to destroy the financial institutions in the East Asian tiger countries during the 1997-1998 crisis.

Jan 6 2015 23:58
noclass wrote:
Saying US has hegemony is a bad idea. US cannot do anything without other passionate friends. How about saying US does the dirty job for the rest to be able to pretend they are human rights advocates! In other words, if US stop its dirty job, the others have to do it and they will forget human rights. Do not focus on one capitalist nation. It won't work and is bad for workers class-consciousness.

Im afraid you're attacking a straw man here. I never said I thought other governments are "human rights advocates".

Mar 28 2015 11:17

US doing our dirty work??? You are deluded. The ONLY terrorists on the planet are the Yanks and their sycophants. The US is not and has never protected any people or any nation from anything - except peace. Libya under Qaddafi was the most peaceful and harmonious nation on the planet. 'Course he had enemies - the avaricious murdering capitalist pigs who he prevented from stealing Libya's wealth! What mythical planet are you living on?

Mar 28 2015 13:22

Veritas, I think there has been a serious misundersfanding on your end. Either that or you are trolling.