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May 01, 2011


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What did you make of this article today:

The short of it is that the rebels are doing more to defend their oil installations. Without knowing anything about the situation on the ground, I would bet $1 that some of these "rebels" have last names like "Wilkerson" and "Gonzalez" and paychecks in British pounds.

I tend to agree with you, although some may be receiving euros and be named Bernard or Dubois. It would be interesting to ask Abdeljalil Mayouf about that.

As long as the rebels control the actual oil fields, their credit will be good. They'll get screwed on terms, but they'll be able to buy stuff.

Note that Libya is sitting on ~~$100 billion in foreign currency reserves. (Foreign debt is stated at around $6 billion; I suspect that's low, but it's certainly a lot smaller than the currency reserves.) So the rebels actually have two pretty strong sources of credit -- "we have oil right now, and when we take over, we'll also inherit this mountain of cash".

The flip side of this is that Qaddafi actually has that mountain of cash. So he's flush. Sanctions will be inconvenient but will not stop his government from getting what it needs.

That said, what the Soviets used to call the 'correlation of forces' will tend to tilt against Qaddafi over time. The rebels will get a steady cash flow plus access to credit, their military competence can only increase, NATO bombing will degrade his 4C and infrastructure, and there's no friendly foreign power that's going to intervene to bail him out. The standard response to this would be a massive military effort aimed at winning the war quickly. Alas for Qaddafi, this is rendered impossible by the incompetence of his own military and Western determination not to let him crush the rebellion. So he has to go for a second-best strategy of playing rope-a-dope -- hanging on to what he's got, picking off isolated and low-visibility rebel strongholds here and there, continuing to hammer at Misrata, and waiting for the allies to get distracted and wander off.

It's possible that this might work, but it's not the way to bet. I'm holding steady at "more than a month, less than a year". In fact, I'll narrow it down a bit. The French Presidential elections are in April, so Qaddafi will be gone well before that.

Doug M.

Gaddafi isn't as flush as all that. He can't access the overseas assets, leaving him with only about $6 billion or so.

Meanwhile, the rebels have already begun looking for foreign loans. They will get them.

My prediction is looking pretty good. (It is the same as Doug's, with a follow-up post about what might go wrong.)

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