By Jason Simpkins
Russia agreed yesterday (Thursday) to write off $4.5 billion in Libyan Cold War-era debt in exchange for military and civilian contracts for Russian companies, Reuters reported.
The deal will almost certainly help Russia tighten its grip on European energy supplies.
"I am satisfied by the way we have solved the debt problem," Russian President Vladimir Putin told reporters. "I am convinced we found a scheme which will benefit both the Russian and Libyan economies and the Russian and Libyan people."
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Much of the debt was the result of Soviet arms supplies to Libya during the Cold War. At the time, trade between the Soviet Union and Libya totaled approximately $1 billion annually. With the subsequent collapse of the Soviet Union trade between Russia and Libya has slowed to a $200 million a year trickle.
Since dismantling its nuclear weapons initiative, Libya has been courted by a growing number of Western companies hoping to secure business and infrastructure contracts, particularly in the nation's energy sector. Its oil and gas industries earned Libya more than $40 billion in oil and natural gas revenue in 2007.
Meanwhile, Russia would very much like to counter the growing Western influence, and close in on what is fast becoming a viable energy alternative for European consumers.
Russia's state-owned oil and gas company, Gazprom OAO, has pocketed a fortune jacking natural gas prices throughout Europe, a market the company dominates. Gazprom supplies 25% of Europe's gas, and has made a habit of raising prices and threatening to cut supplies, an action that would leave millions literally out in the cold.
A memorandum of cooperation between Gazprom and Libya's state energy conglomerate National Oil Corporation (NOC) was one of ten trade, investment and political agreements reached during President Putin's two-day visit to Tripoli. Stroytransgaz OAO, another Russian company is in talks to build a network of natural gas pipelines on the Mediterranean coast of Libya, the International Herald Tribune reported.
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Russia seeking tighter economic relations with Libya