China’s Libya Problem


The Arab Spring hasn’t been kind to China – it has drawn significant international criticism for its decision to veto U.N. Security Council resolutions censuring Syria’s brutal crackdown on peaceful protesters demanding increased freedoms. But it’s in Libya where China is most likely to feel the economic pains of its rigid foreign policy. Beijing’s refusal to support the rebels who toppled Muammar Gaddafi during an eight month revolution will adversely affect China’s future dealings in Libya. The fact is that the challenges facing China in Middle Eastern countries such as Libya and Syria will force decision-makers to reconsider how their support for teetering authoritarian regimes affects their regional business interests.

Unlike Western powers such as France and Britain, China was reluctant to support Libya’s rebels when they asked the international community to intervene military last March. It abstained from a Security Council resolution authorizing “all necessary measures” to protect civilians. Later that month, Chinese President Hu Jintao told French President Nicolas Sarkozy that he should “give peace a chance.” Official Chinese media outlets described the revolution as “foreign military intervention” leading to “war and chaos.” Chinese correspondents were reportedly prohibited from using the word “revolution” in their dispatches from Libya. Despite refusing to support the rebels, Beijing initiated contact with their interim government, known as the National Transitional Council (NTC), in the spring through its embassies in Egypt and Qatar.

Relations between China and the NTC reached a nadir in September just after the rebels took Tripoli. Documents found by the Canadian newspaper The Globe and Mail revealed that Gaddafi officials traveled to Beijing in July and met with representatives of state-controlled arms manufacturers such as the China North Industries Corporation, the China National Precision Machinery Import and Export Corporation, and China XinXing Import and Export Corporation. According to the documents, the Chinese companies were prepared toviolate the U.N. arms embargo imposed on Libya and sell Gaddafi $200 million worth of weapons, such as rocket launchers, antitank missiles, and portable surface-to-air missiles.

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NTC officials were quick to condemn the deal. Then-Deputy Prime Minister Ali Tarhuni said that if they were true, the allegations would “make it difficult for Libya” to support future Chinese investment there. In February, Libyans stormed its embassy in Tripoli.

Even before the revolution, Chinese-Libyan relations were never a smooth affair. Tripoli severed ties in 1980 after Beijing supplied weapons to neighboring Egypt, with whom Libya fought a short border war in 1977. In 2009, the China National Petroleum Corporation agreed to purchase the Libyan assets of Canadian oil company Verenex for $406 million. But the Libyan government blocked the deal, forcing Verenex to unload its operations to the Libyan National Oil Company at a significant discount.

Despite the challenges facing China, it’s still an important player in the Libyan market. In 2010, China consumed 11 percent of Libya’s oil exports. It’s also Tripoli’s second largest supplier after its colonial patron Italy, accounting for 10.54 percent of Libyan imports in 2009. China also has significant business interests in Libya, ranging from railway projects to automobile sales. The bulk of Beijing’s exports, though, are concentrated in the construction and telecommunications sectors. In all, Beijing had outstanding contracts worth about $20 billion before the war, employing 36,000 Chinese before the revolution.

But despite its numerous investments in the country, Libya is a relatively insignificant Chinese market, even within impoverished Africa. Libya doesn’t rank among Beijing’s top five African trading partners. And although it’s the third largest consumer of Libyan oil, these purchases accounted for less than 5 percent of Chinese petroleum imports in 2010.

Nevertheless, China is eager to reenter Libya’s lucrative market. Beijing has been bolstered by NTC announcements that Libya will honor all contracts signed by the Gaddafi regime. However, the council has indicated that countries that were supportive during the revolution will be given preferential treatment in future deals.

Realizing that it has a lot of ground to recover, Beijing sent a trade delegation to Libya recently headed by the director of the Ministry of Commerce’s Foreign Investment and Economic Cooperation Department. The mission was tasked with gauging the status of Chinese contracts and scouting out potential new ones. Among the companies that participated in the delegation were China State Construction Engineering Corp, China Gezhouba Group Corporation, Huawei Technologies, and Zhongxing Technologies (ZTC). Though telecommunications companies Huawei and ZTC have resumed operations in Libya, none of China’s construction companies – which account for the lion’s share of Beijing’s interests in the country – have done so.

Beyond repairing relations with Libya, Beijing is faced with a larger dilemma – how to balance its traditional policy of non-intervention in a nation’s domestic affairs with its growing foreign business interests. China has historically been reluctant to censure authoritarian states in international forums and has wielded its veto power on the Security Council to prevent countries such as Zimbabwe from being reprimanded.

In a recent article in Foreign Affairs, David Zweig and Bi Jianhai claimed that China “has been able to adapt its foreign policy to its domestic development strategy.” But Beijing’s position during the Libyan revolution suggests the opposite. And with the historically authoritarian Arab world slowly inching toward democracy, Beijing will have to reassess its position or see its business interests suffer. In Libya, it will take years to mend China’s damaged reputation, meaning that it will likely lose out on lucrative reconstruction deals for the foreseeable future. Given China’s increasing investments abroad, long held dogma can no longer drive foreign policy.

Steven Sotloff is a Yemen-based writer and an adjunct fellow with the Foundation for Defense of Democracies.

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