Not yet beyond anti-trust regulation's reach

An Australian regulator has foiled what seems to be a thinly-veiled attempt to tighten China's already-strong grip on the world market for rare earth metals.

A Chinese company has abandoned plans to take control of the rare-earths explorer Lynas Corporation Ltd after Australian regulators demanded it reduce the scope of the planned transaction.

Market observers say the deal was an example of China's bid to tighten its grip on the rare earths market.

Almost all of the world's rare earths are produced in China.

This reminds me of the time that Russia tried to buy all of Libya's oil and gas. That wouldn't have been good news for Europe. This is a good reminder that there is no infallible anti-trust regulator of last resort in world capitalism.

Libya creeps a bit further

Libya has been getting tough with foreign oil companies, and now in one stroke has screwed both Chinese and Canadian companies:

China National Petroleum Company said Tuesday that it was withdrawing its $460 million bid to buy the Libyan assets of Canadian oil producer Verenex Energy amid stiff resistance to the transaction from the Libyan government.

The Libyan government is now expected to acquire Verenex’s Libyan assets at a lower price than what the Chinese were offering. Verenex’s shares tumbled 19 percent on the news Wednesday.

This sort of meddling - not allowing a foreign owner to realize full market value for its holdings - will raise fears of a "creeping nationalization" of the nations oil assets, and may chill foreign investment (although some countries are still trying pretty hard).

Oil deal "very big part" of Lockerbie bomber release

I'm basically stealing the headline from Green Sheet, which has been all over this story since the beginning.

Justice Secretary Jack Straw said trade, particularly a deal for oil company BP PLC, was "a very big part" of the 2007 negotiations that led to the prisoner deal. The agreement was part of a wider warming of relations between London and Tripoli.

"Libya was a rogue state," Straw was quoted as saying by The Daily Telegraph newspaper. "We wanted to bring it back into the fold and trade is an essential part of it — and subsequently there was the BP deal."

It might have been the pragmatic thing to do, but that won't play very well with the British electorate (and nor will, probably, Gordon Brown's tardy posturing over the issue).

Libya: Oil JVs must be led by Libyans

In Brazil it's local content; in Libya, it's local managers.

A government directive instructs all companies with foreign participation to appoint Libyan heads, according to a foreign oil executive and a western diplomat. All foreign companies, including those which are involved in oil production, operate as joint ventures.

Every country with oil (or any other depletable natural resource) faces the challenge of how to translate the fixed value of that resources into more renewable sources of economic value. Oftentimes this is by encouraging the development of domestic technical capabilities and companies (see Brazil) or value-added industries (like refining and petrochemicals in Saudi Arabia). Libya's latest move will strike some as more pernicious. Libyan mid-level managers could be passed off as capability-building; Libyan executives sounds more like empire-building for well-connected figures, and increasing control of oil production at the expense of foreign partners.

Obviously the news isn't being received enthusiastically by Western executives.

“This is not good for the Libyan economy,” said the western executive. “Companies which are here will stay but if you are still deciding you will think twice.”

... and...

“The usual way is at least for the general manager to come from the [foreign] company which pays the costs,” said an oil executive. “Exploration is paid for 100 per cent by the foreign partner. It is very difficult to believe that international companies will agree to a Libyan general manager.”

Libya is one of the most exciting locations in the world for new oil exploration (worth making major diplomatic sacrifices for, depending who you believe). But even so, this latest news will chill foreign interest, as companies increasingly worry about the specter of an old and familiar game - invite foreign companies in, find resources, commence extraction, acquire capabilities... and then kick them out and keep the full proceeds for your country.

Unspoken reasons for Lockerbie bomber release

When Scotland released convicted Lockerbie bomber Abdel Basset al-Megrahi to return to Libya, no one believed for long that it was out of the pure goodness of their hearts (although al-Megrahi has terminal cancer and only three months to live).

Naturally, oil was atop of the list of suspects.

The British government allowed the Lockerbie bomber to be covered by a prisoner transfer agreement with Libya because that was in the "overwhelming interests of the United Kingdom" as a major oil deal was being negotiated, a newspaper reported Sunday.

The Sunday Times, citing leaked correspondence between Justice Secretary Jack Straw and his Scottish counterpart Kenny MacAskill, said the decision was made as "wider negotiations" with the government of Libya continued.

On Sunday, Straw dismissed as "simply untrue" any suggestion that economic considerations had an effect on the decision to release Abdel Baset al-Megrahi.

The story goes that a deal between BP and Libya was on the rocks, and the release of al-Megrahi was a related concession.

The idea that the release was a chess move in the Great Game of energy is both plausible and great political fodder - so much so that Tory leader David Cameron has vigorously jumped on the bandwagon.

But according to FP Passport, the release may have been more legal than a matter of energy geopolitics. Al-Megrahi had an appeal pending which may have succeeded, to much public embarrassment.

Lawyers, politicians, diplomats and relatives of Lockerbie victims now believe that the former Libyan intelligence officer is innocent.Robert Black QC, an emeritus professor of Scottish law at Edinburgh University, was one of the architects of the original trial in Holland.He has closely followed developments since the disaster happened and in2000 devised the non-jury trial system for the al-Megrahi case.

Even before the trial he was so sure the evidence against al-Megrahi would not stand up in court that he is on record as saying that a conviction would be impossible. When I asked how he feels about this remark now,Black replied: "I am still absolutely convinced that I am right. No reasonable tribunal, on the evidence heard at the original trial,should or could have convicted him and it is an absolute disgrace and outrage what the Scottish court did."

So maybe it was just to save legal face, and not everything is related to resources after all.