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China urges Libya to protect investments

BEIJING (Reuters) - China on Tuesday urged Libya to protect its investments and said their oil trade benefited both countries, after a Libyan rebel warned that Chinese oil companies could lose out after the ousting of Muammar Gaddafi.

The deputy head of the Chinese Ministry of Commerce’s trade department, Wen Zhongliang, was responding to a question about the official at the Libyan rebel-run oil firm, AGOCO, who said Russian and Chinese firms could lose out on oil contracts for failing to back the rebellion against Gaddafi.

“China’s investment in Libya, especially its oil investment, is one aspect of mutual economic cooperation between China and Libya, and this cooperation is in the mutual interest of both the people of China and Libya,” the commerce official Wen told a news conference.

“We hope that after a return to stability in Libya, Libya will continue to protect the interests and rights of Chinese investors and we hope to continue investment and economic cooperation with Libya,” said Wen.

If acted upon, the warning from Abdeljalil Mayouf, an information manager at AGOCO, would be a headache for China, the world’s second-biggest oil consumer, which last year obtained 3 percent of its imported crude from Libya.

But his warning may not represent the position of an emerging, post-Gaddafi government in Tripoli. Beijing has wooed Libyan rebels, and there is sure to be a cacophony of voices among opposition groups, said Yin Gang, an expert on the Arab world at the Chinese Academy of Social Sciences in Beijing.

“This was one individual’s opinion. I can say in four words: They would not dare; they would not dare change any contracts,” said Yin. He said Chinese companies have relatively few investments in Libya, where Western companies were favored even under Gaddafi in recent years.

“Libya is still in a state of chaos and hasn’t formed a government. There are certainly different views among the rebels,” he added.

The rebel official’s warning nonetheless showed the tricky political terrain facing China in Arab countries emerging from popular insurrections, said Ben Simpfendorfer, managing director of Silk Road Associates, a Hong Kong-based consultancy that specializes in business between China and the Middle East.

The Kingdom of Libya flag in front of a refinery in Ras Lanuf, March 8, 2011. REUTERS/Goran Tomasevic

“China was unusually quick to support to the NTC,” said Simpfendorfer, referring to the National Transitional Council, the main rebel group at war with Gaddafi.

“Relative to China’s typical foreign policy response, that was quite important, but relative to what Europe and the United States did, that falls short. So I think they will struggle.”

China shipped in roughly 150,000 barrels per day of crude oil from Libya last year through Unipec, the trading arm of Asia’s top refiner Sinopec Corp that holds the long-term supply contract. That amounted to about one tenth of Libya’s crude exports.

“It’s not Saudi Arabia, but it’s not to be sneezed at,” said Simpfendorfer.


By Tuesday, the Libyan embassy in Beijing had switched to using the red, black and green flag favored by the rebels. Any staff inside were not picking up phone calls.

“Even if Chinese companies fail to sign oil contracts with new Libyan government, there is not much impact on China’s crude imports,” said a Beijing-based industry official who spoke on condition of anonymity.

About 75 Chinese companies operated in Libya before the war, involving about 36,000 staff and 50 projects, according to early Chinese media reports. Many of those firms were engaged in building roads, buildings and infrastructure.

Yet Gaddafi’s government was wary of China’s economic reach, and Beijing also will face a harder time than Western governments in winning the ears of a government emerging from the rebellion, said Simpfendorfer, the consultant.

China’s top three state oil firms CNPC, Sinopec Group and CNOOC all had engineering projects in Libya, but no oil production yet, company officials said.

China and Russia have a tradition of opposing intervention in sovereign states, even when Western government favor military action on humanitarian grounds.

China did not use its U.N. Security Council veto power in March to block a resolution that authorized the NATO bombing campaign against Gaddafi’s forces, but it then condemned the strikes and urged compromise between his government and rebels.

Since then, Beijing has courted Libyan rebels by hosting their leaders and sending envoys for talks.

Reporting by Chen Aizhu, Langi Chiang, Xu Wan and Judy Hua; Editing by Ken Wills and Sanjeev Miglani