Libya's stake in european property causes alarm

Regardless of how the Libyan revolt plays out, in the global economy the humanitarian crisis is just one deadly aspect of the fighting. Thousands are believed dead, and the fabric of society has been shredded in what has become a civil war. But to the nations of Europe that have come to rely on a steady flow of oil and petrodollars from Moammar Kadafi's nation, the destruction of what could be called Libya Inc. is likely to be the most painful blow.

When the United Nations lifted sanctions on Libya in 2003, after Kadafi's regime accepted responsibility for the bombing of a Pan Am jet over Lockerbie, Scotland, many European countries rushed to do business with Kadafi, despite his erratic history. Why? Because Libya was sitting on a deep, largely untapped reservoir of oil and a mountain of cash.

Seeing the opportunity, Europe pounced. As a result, today just about all of Libya's major trading partners are European. Take Italy, for example. Italy is by far Libya's most active business partner, with more than $12 billion in two-way trade annually. Libya supplies almost a quarter of Italy's oil, and Italy is the world's largest importer of Libyan crude. Libya also owns 7.5% of the Italian bank UniCredit and has investments in Fiat, the defense conglomerate Finmeccanica, the energy company ENI, the soccer team Juventus and a variety of other Italian businesses. 

In many ways, the nation with the most at stake economically is Britain. Although its annual trade with Libya amounts to less than $2.5 billion, Britain has recently emerged as a major target for Libyan investments. Libya has spent hundreds of millions of dollars on prime London commercial real estate. And last year, a senior executive with the Libyan Investment Authority announced that the fund had earmarked $8 billion exclusively for Britain. This pledge was welcome news for the British government, which has been trying to sell more than $40 billion in state-owned property to help address its yawning budget deficit. In short, it needs the money. 

Source: Los Angeles Times