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EU states’ efforts to “deter” migrants from Libya have helped kill more than 14,000 people and exposed 40,000 others to “crimes against humanity”, according to a lawsuit filed at the International Criminal Court (ICC) in The Hague.
“‘Deterrent effect’ – what does it mean? It means [to] sacrifice the lives of some, in this case of many, to change the behaviour of others, to discourage others from doing the same thing,” Omar Shatz, one of the co-authors of the lawsuit, told The Guardian, a British newspaper on Monday (3 June).
Federica Mogherini (C), High Representative of the European Union for Foreign Affairs and Security Policy, arrives to Mitiga International Airport prior to her departure, in Tripoli, Libya, 14 July 2018. [Sringer/EPA/EFE]
A rescue operation in which an Italian towboat rescued more than 100 migrants and returned them to Libya earlier this week may have been in breach of international law, the United Nations said on Tuesday (31 July).
A spokesman for the UN migration agency said it could not establish the location of the rescue, which is key to establishing migrants’ rights, although some other parties involved in the case have made contradictory assertions about the incident including where it took place.
The rescue coincides with a growing perception among human rights groups that some European countries are taking an increasingly hard line in their efforts to cut the number of migrants arriving on their shores, after Italy’s new government closed its ports to charities’ rescue boats in past weeks.
According to Spanish charity Proactiva Open Arms, an Italian towboat, Asso 28, rescued 108 migrants from international waters on Monday and took them to Libya, their country of departure.
Stiamo raccogliendo tutte le informazioni necessarie sul caso del rimorchiatore italiano #AssoVentotto che avrebbe riportato in #Libia 108 persone soccorse nel Mediterraneo. La Libia non è un porto sicuro e questo atto potrebbe comportare una violazione del diritto internazionale
This would constitute a breach of international law, under which people rescued in international waters cannot be returned to a place where their lives are put in danger. Both the United Nations and European Union have acknowledged that Libya is not safe.
Italy’s coast guard initially said on Tuesday that the rescue was coordinated by the Libyan coast guard, and later clarified that the operation had taken place in Libya’s so-called “search and rescue (SAR)” area.
The Libyan coast guard was not immediately available for a comment.
Libya’s SAR is not clearly defined but is widely understood to extend far beyond its national waters.
Proactiva spokeswoman Laura Lanuza said its members learnt the rescue occurred in international waters because their boat Open Arms was nearby and they could listen to radio communications between the Italian ship and the Libyan authorities.
The UN refugee agency said the operation “could represent a violation of international law,” it said on Twitter.
A spokesman for the UN migration agency said the agency was still investigating the case but confirmed the return of the migrants to Libya.
He said the Libyans first told him the rescue operation was carried out by “an unknown vessel”, then changed their version and said the rescuing boat was Libyan.
The head of mission at Open Arms, Fabrizio Gatti, contradicted the Libyan version and said a member of the Asso 28 crew told him over the phone the Italian boat carried out the rescue and was taking the migrants back to Libya. He said he had a record of the conversation.
Asso 28 is now docked in Tripoli, the Libyan capital, according to Marine Traffic, a real-time information service on ships movements.
Charities are at loggerheads with the new Italian government and its right-wing home affairs minister Matteo Salvini who has adopted a hard line to cut the number of migrants arriving on Italy’s shores.
German NGO Sea-Watch also condemned “the first pushback by an Italian vessel for years,” on Twitter.
108 persone in fuga dalla Libia soccorse in acque internazionali da nave ITALIANA e portate a Tripoli.
Il caso #Asso28 segna un grave precedente e richiama la condanna dell’Italia per i RESPINGIMENTI COLLETTIVI (CEDU 2012, caso #Hirsi).
In 2012, the European Court of Human Rights ruled that Italy violated human rights by sending migrants intercepted at sea back to Libya in 2009.
The court said the practice violated international obligations to not return individuals to countries where they could be at risk of human rights abuses.
Salvini praises Libya
As NGOs expressed their dismay over the latest boat controversy, Italy’s far-right interior minister Matteo Salvini, who has closed the country’s ports to migrant rescue ships, praised the Libyan authorities.
“Over the last hours the Libyan coastguard has saved and brought back 611 immigrants to Libya. NGOs protest and traffickers lose their business? Well, we carry on with our work”, he tweeted.
La Guardia Costiera Libica nelle ultime ore ha salvato e riportato a terra 611 immigrati.
Le ONG protestano e gli scafisti perdono i loro affari? Bene, noi andiamo avanti così!#portichiusi e #cuoriaperti
However, the speaker of Italy’s lower house, Roberto Fico, who belongs to the Five Star Movement that governs in a coalition with Salvini’s League, appeared to disagree with sending migrants back to Libya.
“Libya is not a safe place… it is clear that you cannot leave migrants there,” Fico said as he met with protesters denouncing the sale of Italian boats to Libya’s coastguard on Monday.
Several commercial ships that have tried to take rescued migrants to Italy — as was standard procedure under the former centre-left government — have found themselves blocked by Salvini’s policy and stranded for days at sea searching for a port where they can disembark.
Former French President Nicolas Sarkozy says allegations he received campaign funding from late Libyan leader Muammar Gaddafi are making his life “hell”.
“I am accused without any physical evidence,” Mr Sarkozy told magistrates, Le Figaro newspaper reports.
He has been placed under formal investigation for illicit election campaign financing in 2007, misappropriation of Libyan public funds and passive corruption.
Mr Sarkozy, 63, denies any wrongdoing.
The centre-right politician, who was in police custody being questioned for two days this week, says his Libyan accusers are seeking vengeance for his decision to deploy French warplanes during the uprising which overthrew Gaddafi in 2011.
In it, he says that he is aware the allegations against him are “serious”, but that they amount to “slander” and have made his life “hell” since 11 March 2011, when the claims were first made by Gaddafi.
Hammer blow for ex-leader
Analysis by Hugh Schofield, BBC News, Paris
These accusations against Nicolas Sarkozy are in a different realm from all those other judicial problems that he has faced. The others are classic allegations of illegal party funding and abuse of influence.
This one is about taking money from a foreign dictator.
In each case, presumption of innocence has to prevail. Mr Sarkozy’s key argument is that he is the victim of a left-wing vendetta: judges out to get him.
On Libya, he points out that his accusers – henchmen of Gaddafi and sleazy middlemen – are not exactly paragons of veracity.
But the truth is that this is a hammer blow to the former president. The judges believe there are “serious and coherent” indications that he did indeed take money from the Libyans, and on that basis they will now conduct their investigation.
The implications are devastating. If the charges are true, then the whole story of Sarkozy’s presidency will have to be re-assessed. More importantly, what would it say about the French-led campaign to topple Gaddafi in 2011? A campaign in which the UK was persuaded by France to take part.
Big questions – if the charges are true. But don’t expect any quick answers. This case could drag on for years.
What is the Libya case about?
In 2013, France opened an investigation into allegations that Mr Sarkozy’s campaign had benefited from millions of euros of illicit funds from Gaddafi.
He failed in his bid to return to power in 2012, however, losing to Socialist candidate François Hollande.
The claims came from a French-Lebanese businessman, Ziad Takieddine, and some former Gaddafi regime officials.
Mr Guéant, who was managing Mr Sarkozy’s presidential campaign in 2007, told the franceinfo website on Tuesday that he had “never seen a penny of Libyan financing”.
He was placed under formal investigation earlier this year over a €500,000 bank transfer in 2008. He has denied wrongdoing and claimed the money came from the sale of two paintings.
Does Sarkozy face other charges?
Criminal proceedings have been launched against Mr Sarkozy in one other case of alleged illicit campaign financing.
It is alleged that he engaged in accounting fraud to overshoot the ceiling for campaign expenditure in 2012, which was €22.5m.
Mr Sarkozy denies he was aware of the overspending.
The affair is known as the Bygmalion scandal.
In connection with his 2007 campaign, Mr Sarkozy was previously cleared over claims that he had used secret funding from L’Oreal heiress Liliane Bettencourt and that he had tried to influence investigating magistrates.
(SKY) The Former French president is being questioned in connection to alleged Libyan funding for his 2007 election campaign.
Former French president Nicolas Sarkozy is being held by police in connection to alleged campaign funding from late Libyan dictator Muammar Gaddafi.
Mr Sarkozy is being questioned as part of an investigation into “irregularities” in election campaign financing, a French court source told Reuters.
He is said to have accepted €50m from Muammar Gaddafi’s regime, claims which have been repeated by the late Libyan dictator’s son and French businessman Ziad Takieddine.
The amount would be more than double the legal spending limit in French elections at that time, which was €21m.
Alleged payments would also violate French laws on foreign financing and declaring the source of campaign funds.
Mr Sarkozy and his campaign manager have repeatedly denied accepting money from Libya.
According to Le Monde, this is the first time Mr Sarkozy has been questioned in relation to this investigation, which was opened in April 2013.
He can be held for up to 48 hours and presented to a magistrates’ court for indictment if police seek charges.
Mr Sarkozy has already been ordered to stand trial in a separate case, concerning the financing of his 2012 re-election campaign, when he lost to Francois Hollande.
In March 2011, Saif al Islam Gaddafi, the late dictator’s son, told Euronews: “Sarkozy has to give back the money he accepted from Libya to finance his electoral campaign. We financed his campaign and we have the proof…
“The first thing we’re demanding is that this clown gives back the money to the Libyan people.”
Mr Takieddine claims he delivered three suitcases stuffed with cash to Paris between 2006 and 2007, and handed them over to Mr Sarkozy in the interior ministry when he was a minister.
Mr Sarkozy was president of France from 2007 until 2012.
He attempted to stage a comeback for the 2017 election, but failed to convince the voters in his own party to support him and had to concede to Francois Fillon and Alain Juppe.
(GUA) Secret papers show how far MI6 went to please Libya’s ruthless intelligence agents – including helping to kidnap the dictator’s enemies. By Ian Cobain
Five days after 9/11, early on a Sunday evening, a small group of senior CIA officers drove from their headquarters in Langley, Virginia, to the British embassy at 3100 Massachusetts Avenue NW in Washington DC, in order to brief MI6 on the agency’s planned response to the attacks.
Leading the delegation was Cofer Black, head of the CIA’s counter-terrorist centre. Black was still wearing the same suit he had put on five days earlier, and looked shattered: he had been working day and night to draw up a cogent plan to protect his country from any further attacks.
Inside the embassy, Black and his colleagues gave a three-hour presentation on their plans. The CIA had been running a kidnap-and-interrogation project on a small scale since the mid-90s, targeting jihadists in Bosnia. It was known as the rendition programme. The plan was to dramatically increase the scale and scope of the programme.
According to Tyler Drumheller, then head of CIA operations in Europe, the MI6 officers listened quietly as Black detailed his plan, which involved the identification, abduction and interrogation of al-Qaida suspects around the globe. At the end of the presentation, Mark Allen, head of counter-terrorism at MI6, observed rather dryly that “it all sounds rather blood curdling”. Drumheller noted that the MI6 officers appeared very worried. Some of his fellow CIA officers, with less experience of dealing with the Brits, mistook their slightly insouciant manner for a sign of approval.
Allen wanted to know what the CIA and MI6 would do after al-Qaida was scattered across the world. He asked: “And what are we going to do, once we have hammered the mercury in Afghanistan?” The CIA officers looked at each other. According to one account of the meeting, Black said: “We’ll probably all be prosecuted.”
The death toll of the 9/11 attacks was still rising and President George W Bush was eager to take a tough stance. The day after the Pentagon briefing, Bush gave a press conference in which he offered a glimpse of what was to come. “I want justice,” he said. “There’s an old poster out west that says: ‘Wanted – Dead or Alive.’”
The implications of this would be thrashed out early the following year by the heads of the intelligence agencies of the US, UK, Canada, New Zealand and Australia. At a meeting at Queenstown, a ski resort in New Zealand, CIA director George Tenet insisted they could only understand and defeat al-Qaida if they worked closely with intelligence agencies across the Muslim world, and if they agreed to do whatever it took to hit back against terrorists. “The shackles, my friends, have been taken off,” Tenet is said to have declared.
One of the most pressing imperatives was to create close ties with the intelligence agencies of the Arab world. With this aim, in 2002 the CIA and MI6 began co-operating with the Libyan External Security Organisation (ESO), Col Muammar Gaddafi’s notorious overseas intelligence agency.
The stated agenda was to learn more about militant Islamism, but that would change the following year once Allen and his British political masters saw an opportunity to enter into negotiations with Gaddafi over his programme to develop weapons of mass destruction. Gaddafi had been trying to develop nuclear capability since the early 1970s, initially by trying to acquire Indian-made weapons, and then by attempting to gain access to uranium ore and enrichment technology.
From the late summer of 2003, as the war in Iraq began to go badly for the US and its allies, it became increasingly clear that Saddam Hussein’s weapons of mass destruction – the WMD programme that officially justified the invasion of Iraq – did not exist. But if Gaddafi could be persuaded to abandon his own nuclear plans, those who had pressed for war against Iraq could claim the invasion had been vindicated.
As the CIA and MI6 built relationships with Libya, the two agencies assisted Libyan spies in the kidnapping of Gaddafi’s enemies. Two leading figures in the Libyan opposition who had fled the country were kidnapped, one from Hong Kong, one from Thailand, and flown back to Tripoli along with their wives and children. Both men were tortured. MI6 gave their Libyan counterparts questions for the prisoners, who, under extreme duress, led them to other Libyan dissidents in exile.
Opponents of the Gaddafi regime who had been living legally in the UK for years were detained by British police, and the British government made a determined attempt to have them deported to Tripoli. Asylum seekers and British-Libyan nationals in Manchester and London were menaced by Gaddafi’s agents, who were invited into the UK and permitted to operate on the streets of Britain alongside MI5. British intelligence handed over details of the targets’ telephone calls to the ESO, and their relatives and friends in Libya were arrested and threatened.
Details of the dark arrangements made by the intelligence agencies of the US, UK and Libya have been gleaned through interviews with government officials and victims of rendition, British government documents disclosed under the Freedom of Information Act, and material that emerged during a lengthy Scotland Yard investigation and a number of civil trials. In large part, however, what follows is based on several extraordinary caches of secret British, American and Libyan intelligence documents that were discovered amid the chaos of the Libyan revolution in 2011, scattered around abandoned government offices, prisons and officials’ private residences. Many of the most intriguing documents were found by Libyan civilians and human rights activists in September that year inside ESO’s offices. Others came to light in various government outposts after Gaddafi was captured and killed the following month. All together, they amount to many thousands of pages.
These papers show that the post-9/11 rapprochement between the Gaddafi regime and the west – and Tony Blair’s government in particular – went far deeper than was previously known.
The most highly publicised result of the renewed dialogue with Libya was the dictator’s announcement that he was abandoning his WMD ambitions, both his nuclear and chemical and biological programmes. Another coup was the signing of multimillion dollar gas and oil exploration deals. Quietly, however, the relationship also bore a more bitter fruit: the kidnappings, detention and beatings carried out and assisted by the CIA and MI6.
These hitherto-secret documents offer a unique glimpse of a realpolitik that would be unimaginable had it not been detailed on one page after another. They show that, in their eagerness to get close to Gaddafi and influence the dictator’s future conduct, Britain’s intelligence agencies were prepared to commit serious human rights abuses on his behalf.
On 20 September 2001, four days after the CIA briefing on the revved-up rendition programme, MI6 spy chief Mark Allen was sitting face-to-face with a senior Libyan intelligence officer. It was well known to western intelligence agencies that Gaddafi was in a panic after 9/11. Libya’s record as a state sponsor of terrorism was established: Gaddafi’s government had been behind the 1988 bombing of Pan Am Flight 103 over the Scottish town of Lockerbie, killing 270 people. It was suspected of involvement in the 1986 bombing of a West Berlin nightclub frequented by US servicemen, and the downing the French UTA Flight 172 over Chad in 1989 with the loss of 170 lives. Furthermore, Gaddafi had made no secret about supplying arms to the IRA.
The dictator, aware of his reputation for supporting terror, had quickly condemned the al-Qaida attacks, but was far from certain this would be sufficient to save him from the wrath of the US. According to a cable from the US ambassador in Cairo, David Welch, Gaddafi had been trying to “call every Arab leader on his Rolodex”, begging them to set up a summit to discourage the US from launching an attack on his country. When he called King Abdullah of Jordan, he had sounded hysterical, Welch wrote.
Sitting across the table from Allen at this meeting was one of the few people capable of calming down the Brotherly Leader. Moussa Koussa had been close to Gaddafi for more than 20 years, and at the time of the meeting was head of the ESO, the organisation that was thought to have organised many of Libya’s terrorist attacks. Gaddafi trusted Koussa, and respected his advice.
Allen and Koussa had much in common: both were in their early 50s, well educated, precise in their manners and fairly devout in their respective faiths: Islam and Roman Catholicism. They were fluent in each other’s native tongues. In the face of the threat from al-Qaida, both were utterly pragmatic. The secret papers show that Koussa offered to provide Allen with information extracted from men held in Libyan prisons, and that both men agreed that their countries’ counter-terrorism experts “should meet to discuss the enemies we both face”.
In a follow-up fax sent two weeks later, Allen said he was “very interested in joint penetration operations” against an organisation called the Al-Jama’a al-Islamiyyah al-Muqatilah bi-Libya, or the Libyan Islamic Fighting Group (LIFG). Although some LIFG members had joined al-Qaida in Afghanistan, its leadership had for years rejected the overtures of Osama bin Laden, and remained focused on the overthrow of Gaddafi. Despite this, Allen clearly believed LIFG members could provide information about the threat from al-Qaida. In particular, he expressed interest in one of the LIFG’s military leaders, a 35-year-old veteran of the Soviet-Afghan war by the name of Abdel Hakim Belhaj.
On 13 November 2001, Bush signed a military order authorising the widespread use of rendition and torture. A few days later, ESO and MI6 met again. By now, the Libyans noted, MI6 were “determined to experiment with recruiting sources”.
Britain was wading into the war on terror. In mid-November, the Anti-terrorism, Crime and Security Act gave the home secretary the power to detain individuals without trial – and the intelligence agencies more power to target suspects.
By August 2002, relations between Britain and Libya were tentatively restored, with the goal of what Blair would later call the “huge prize” of security co-operation with Libyan intelligence. Gaddafi’s son Saif was admitted to the London School of Economics at his second attempt. During a preliminary telephone conversation, Blair and Gaddafi exchanged pleasantries. Junior foreign office minister Mike O’Brien visited Gaddafi at Sirte, the dictator’s birthplace, and delivered a letter from Blair. It was the first British ministerial visit since 1984, when the UK had severed diplomatic relations after a police officer, Yvonne Fletcher, was murdered by shots fired from inside the Libyan embassy in London.
No matter that Gaddafi was regarded across the Middle East as dangerously insane. He may be a madman, those in the higher reaches of the British government appear to have concluded, but at least he’s our madman.
Much of the work involved in building the partnership was done not by ministers, or even by diplomats, but by intelligence officers, particularly Allen and Koussa. They met frequently over the course of 2002 and appear to have become firm friends. Gifts of dates and oranges from Tripoli began to appear at MI6’s headquarters on the south bank of the Thames, while on 20 September 2003, on the first anniversary of the two men’s initial meeting, Koussa was invited to “a banquet dinner at the Goring”, a luxury hotel.
It was Koussa’s first visit to the UK in decades. In June 1980, as head of the Libyan People’s Bureau, as his country’s embassy in London was then known, he had given an extraordinary interview to the Times in which he admitted having given his personal approval for the murder of two Libyans resident in the UK. Lord Carrington, then the foreign secretary, had barely permitted Koussa’s feet to touch the ground as he was bundled out of the country.
And here he was, 23 years later, being wined and dined a stone’s throw from Buckingham Palace. “The head of the British delegation warmly welcomed his guest, expressing his happiness,” according to the Libyan minutes. There does not appear to have been any discussion about the murders Koussa had authorised in London two decades earlier. Nor was there any mention of the 10 bomb attacks that were aimed at Gaddafi’s opponents in Manchester and London in March 1984, injuring 29.
Instead, there were talks about “bilateral and international issues”, intelligence sharing, and about MI6’s desire that Saif Gaddafi should be safe and comfortable while living in London. The conversation then turned to the dictator’s political opponents living in the UK. “What we need to deal with these individuals who reside in the UK,” a senior MI6 officer is reported as saying, “is tangible evidence to take instant actions against them.”
Emboldened by the new spirit of co-operation, in October 2002 Blair wrote to Gaddafi, suggesting that the sanctions that were holding back his country’s oil industry and placing an enormous burden on its economy might be lifted, if he would agree to abandon his WMD programme, which had long been a matter of great concern to the west.
On 25 November 2002, the Libyans passed MI6 a list of 79 Libyan opposition activists, who they referred to as “heretics”, living in the UK. Most, if not all, were said to be members or supporters of the LIFG.
An underground group formed in 1995 by Libyans who had fought against the Soviet Union in Afghanistan, the LIFG was dedicated to the overthrow of Gaddafi and the establishment of an Islamic government in Tripoli. It had announced its existence through a series of clashes with Gaddafi’s forces in the east of the country. For many years it had two leaders: Belhaj was its military commander, while another man, Sami al-Saadi, was its spiritual leader.
While the LIFG leadership never condoned al-Qaida’s attacks on the west, and insisted it was concerned only with the overthrow of Gaddafi, hundreds of its members joined al-Qaida in Afghanistan following a failed assassination attempt on the dictator in 1996, and after 9/11, the US government listed it as a terrorist organisation. It was not proscribed in the UK at this time, however. Many of its members had fled to Britain, as well as to China and Iran. Al-Saadi, his wife, Karima, and four children were among those who settled in London briefly, before moving to Tehran.
In the UK, the LIFG was tolerated by the government. They were able to regroup and raise funds. From late 2002, however, as the rapprochement between London and Tripoli warmed up, Libyans resident in the UK were stopped and questioned at airports, and there were police raids on family homes in London and Manchester. When the UK-based Libyan author Hisham Matar – whose father, a noted member of a different dissident group, had been disappeared by the Gaddafi regime in 1990 – dined out in London, he began choosing seats that faced the door of the restaurant. “None of us felt safe,” he later wrote.
In early 2003, as US and UK forces mustered on the borders of Iraq, Gaddafi was afraid they would target Libya. According to one diplomat, he called the Italian prime minister, Silvio Berlusconi, begging him to “tell them I will do whatever they want”.
In March, Blair secured the backing of the Commons for war against Iraq, and two days later the invasion began. Three weeks after that, Baghdad appeared to have fallen to the US and the war was thought to be all but over: on 1 May, on board the aircraft carrier USS Abraham Lincoln, Bush gave an address in front of a large banner declaring: “Mission Accomplished.”
The secret papers show that by then Allen was regularly meeting with a senior CIA officer, Stephen Kappes, to discuss ways they could make sure Gaddafi abandoned his ambitions to develop nuclear, chemical and biological weaponry. During their conversations with Koussa, no sanctions were threatened; there was little need, as all three men knew Gaddafi was terrified of being invaded by the US. At meetings in Tripoli, MI6 officers discussed not only the WMD programme, but ways of targeting Libyan “heretics” around the world. British intelligence officers told the Libyans they had intercepted Sami al-Saadi’s telephone calls from his home in Tehran.
At one meeting between the ESO, MI6 and MI5, the British passed over a briefing paper that MI5 had prepared. “Greetings from the British Security Service,” it read. “We … wish to share with you information that we have that may be of interest.” It contained details about the whereabouts and movements of Gaddafi’s opponents in London, Brighton, Peshawar and Los Angeles. MI5 also passed on details of “UK-based Libyan extremists”. British intelligence was starting to track the LIFG leadership. ESO asked the British if they could help capture Belhaj, who was in China with his Moroccan wife, Fatima Bouchar. MI6 replied that they must first sound out the Chinese.
British intelligence officers were not unaware of how this activity would be viewed at home. In advance of another meeting, Sadegh Krema, the deputy head of the ESO, passed around an internal note in which he warned that the British were particularly anxious that the meeting should remain “confidential”, because the “domestic political and legal situation [in Britain] is complicated”.
In Iraq, meanwhile, it was dawning on the US and its allies that the mission was very far from being accomplished. On 7 August, a car bomb exploded outside the Jordanian embassy in Baghdad, killing 17 and injuring dozens. Twelve days later, a massive bomb packed into a cement lorry blew apart the United Nations HQ at the Canal Hotel in Baghdad, killing UN special representative Sergio Vieira de Mello and 21 others. A determined insurgency was underway.
Confidence in the case for going to war was evaporating in London and Washington. The head of the Iraq Survey Group, a multinational body set up to find Saddam’s WMDs, announced that there was little evidence he possessed any.
If the US and UK could successfully disarm Gaddafi – and link that success to the war in Iraq – the invasion would not appear to have been such a ruinous miscalculation. Then, on the Mediterranean, north of Libya, the allies got a lucky break.
The BBC China, a German-registered cargo ship, left the Suez Canal on 4 October 2003 and sailed west towards Libya. Italian naval vessels intercepted the ship and forced her into the port at Taranto, where a search established that five shipping containers labelled “used machine parts” were packed with thousands of centrifuge components for Gaddafi’s uranium enrichment programme.
The components had been tracked from Malaysia, where they had been manufactured on behalf of Abdul Qadeer Khan, the Pakistani nuclear scientist who is credited with fathering not only his own country’s nuclear bomb, but also with providing the expertise and equipment that became the seeds for the North Korean and Iranian nuclear programmes. Libya had also turned to Khan’s one-stop proliferation shop.
Allen invited Koussa back to the UK. This time it was for a 90-minute meeting on 20 November at the Bay Tree, a wisteria-clad five-star hotel in the Cotswolds, just 10 minutes’ drive from the RAF base at Brize Norton. The Libyan minutes of the meeting explain that Allen and Kappes passed on personal messages for Gaddafi from both Blair and Bush, before coming to the point: they knew the Libyans were pressing ahead with their nuclear weapons programme, while pretending to dismantle it.
Koussa responded by pledging that the Libyan government would now scrap the programme and accepted that at this stage, “there is no room for evasion or dribbling or twisting”.
Eleven days later, a 13-strong US/UK inspection team, led by Kappes and Allen, flew into Mitiga airport in Tripoli. According to subsequent news reports in the US, they discovered evidence of a chemical weapons programme that was rudimentary and untested, and a nuclear weapons project that was at a surprisingly advanced stage. Work began to dismantle the dictator’s weapons plants and remove blueprints, centrifuges and other equipment from the country. Around 13kg of 80%-enriched uranium were reported to have been taken away with the assistance of Russia. The whole process would be completed in just four months.
It was a coup for Washington and Whitehall, who were determined to make the most of its propaganda value. Back in London, at the Travellers Club in Pall Mall, Allen met Robert Joseph, senior counter-proliferation official at the US National Security Council, to discuss the wording of a statement that Gaddafi was to make, announcing that he had abandoned his WMD ambitions.
It was agreed that Gaddafi would make the announcement on Libyan television on 19 December. Blair and Bush would then make their own statements. Capricious as ever, Gaddafi decided at the last minute that he wasn’t going to do it – he wanted to watch football on TV, apparently – and his foreign minister made the announcement instead.
In their responses, neither Bush nor Blair mentioned Iraq, but they did allude to the invasion. “We have shown resolve,” said Bush. “In word and in deed, we have clarified the choices left to potential adversaries.” Blair added that “recent events and political determination” had, after all, made the world a safer place. Opinion pieces written by supporters of the Iraq war claimed that disarming Gaddafi showed the war was justified.
On Christmas Eve, Allen sent a letter to Koussa, to be carried personally by the ESO courier who had just arrived in London, bearing dates and oranges. “It has been a real privilege working with you,” he wrote. “At this time sacred to peace, I offer you my admiration and every congratulation.”
But the suspension of Gaddafi’s WMD ambitions was not, it turned out, the end of their collaboration.
In February 2004 the LIFG commander Abdel Hakim Belhaj and his wife, Fatima Bouchar, who was four-and-a-half months pregnant, attempted to board a commercial flight from Beijing to London, where he hoped to claim asylum. Instead, the Chinese authorities deported the couple to Malaysia. On arrival in Kuala Lumpur they were detained.
Among the secret papers discovered in Koussa’s own office was a fax from MI6, dated 1 March 2004, which informed the Libyans of the couple’s location, and copies of letters from Koussa to the Malaysian ambassador to Libya, requesting his assistance. There is also a fax from the CIA, dated 6 March 2004, about “the capture and rendition” of Belhaj. “We are planning to take control of the pair in Bangkok and place them on our aircraft for a flight to your country,” it says.
The following evening, the Malaysian authorities put the couple on a commercial flight to London, via Bangkok. In Bangkok, they were taken off the aircraft, hooded, and taken to a CIA detention centre somewhere within Don Mueang international airport.
Belhaj says he was beaten and hung from hooks, and blasted by loud music. Bouchar told me that when she was dragged away from her husband, she feared he was going to be killed. “They took me into a cell, and they chained my left wrist to the wall and both my ankles to the floor. I could sit down but I couldn’t move.” Bouchar was chained to the wall for five days, and given water but no food. “They knew I was pregnant. It was obvious.” She was forced to lie on a stretcher, and was bound to it, head to foot, with sticky tape. They put a hood and earmuffs on her. She was unable to move, hear or see. “My left eye was closed when the tape was applied. But my right eye was open. It was agony.”
After five days, the pair were taken to Tripoli on a flight that took 17 hours. On arrival they were driven separately to Tajoura prison, east of the city. Belhaj says Koussa greeted him in person. Then he was chained to a wall, he says, and beaten. Almost immediately, MI5 and MI6 began sending questions that they wanted the Libyans to put to him. Many concerned the lives of other Libyan dissidents around the world. And the questions would keep coming. They are all there, in the secret papers discovered in Tripoli: more than 1,600 questions.
Nine days after the couple’s arrival at Tajoura, Allen sent to his friend Koussa what is perhaps the most remarkable fax of the entire series. He started by expressing his gratitude to his friend for arranging a visit by Tony Blair to Gaddafi – or “the Leader” as he put it. Blair, he explained, would be travelling with journalists, and would like to meet the Leader in his tent. “The plain fact is the journalists would love it,” Allen wrote.
He then congratulated Koussa on the “safe arrival” of Belhaj. “This was the least we could do for you and for Libya to demonstrate the remarkable relationship we have built over recent years.” He added that “amusingly”, the CIA had asked that MI6 channel all requests for information from Belhaj through them. “I have no intention of doing any such thing. The intelligence … was British. I know I did not pay for the air cargo. But I feel I have the right to deal with you direct on this.”
Blair visited Libya for the first time on 25 March 2004, six days after Allen sent his “safe arrival” fax. After being photographed shaking hands with Gaddafi, he announced that Libya had “found a common cause, with us, in the fight against extremism and terrorism”. At the same time, in London, it was announced that the Anglo-Dutch oil giant Shell had signed a £110m deal for gas exploration rights off the Libyan coast.
Two days after that, a second UK-US-Libyan rendition operation was underway. The LIFG spiritual leader Sami al-Saadi had also moved to China with Karima and the four children. The family had travelled to Hong Kong after al-Saadi approached MI5 via an intermediary to ask if they would be allowed to return to London. He was under the impression he was to be interviewed by British diplomats in Hong Kong. Instead, the entire family was detained by Hong Kong immigration authorities.
Al-Saadi’s eldest child, Khadija, then aged 12, recalls how she and her younger brothers, Mostapha, 11, and Anes, nine, and six-year-old sister Arowa, were separated from their parents before they were all taken aboard an Egyptian airliner, which was empty but for a small number of Libyan men.
“After a while I was allowed to go into the next compartment and see my mother,” she says. “She was crying. She told me they were taking us to Libya. Initially, I didn’t believe it. Then I realised it was true, and I was very scared. I thought we would all be killed. Then I was told to go and say goodbye to my father. He was handcuffed to a seat in another compartment and had a drip in his arm. I fainted.”
After the aircraft landed in Tripoli, Khadija watched as her parents were taken off and hooded, and then their legs bound with wire. Mostapha and Anes were blindfolded. The family was then driven in a convoy of vehicles to the prison at Tajoura.
Al-Saadi says he was beaten, threatened and subjected to electric shocks. Khadija knew her father was being tortured: every few days he was brought to see his family for a few minutes before being taken away again. “I think they were doing it to increase the pressure on him.” The children decided to embark on a hunger strike, “but they didn’t care whether we ate anything or not”. The children were released, along with their mother, after 10 weeks, and allowed to enrol in school. Al-Saadi, like Belhaj, would spend six years in Gaddafi’s prison.
Later that summer, Allen left MI6 and was appointed as an advisor to BP. At the end of the year he was knighted.
In 2005, the LIFG was banned in the UK. Three members were prosecuted for providing it with funds and false passports, and sentenced to between 22 and 45 months in prison. A number of other LIFG supporters in the UK were detained on the basis of information they say was extracted under torture from Belhaj and Al-Saadi. They were subjected to British control orders – detained pending deportation to Libya. Some of them had been granted asylum from the Gaddafi regime, and had been living peacefully in the UK for years. But now, it seemed, control orders were being used as instruments of international diplomacy.
The UK government signed a memorandum of understanding with the Gaddafi regime under which the Libyans pledged not to execute, torture or mistreat anyone who was forcibly returned. At one point, the British government suggested – in all seriousness – that Libyan compliance with the Memorandum could be monitored by a body called the Gaddafi Foundation, which was run by the dictator’s son, Saif. Such was Libya’s appalling human rights record, however – with opponents of Gaddafi facing murder, torture and arbitrary detention – that the government was never able to deport its detainees: in one judgment after another, the courts ruled that anyone returned to that country would have no chance of a fair trial.
In April 2007, Blair wrote a personal letter to Gaddafi. “Dear Mu’ammar,” he began, “I trust that you, and your family, are well. With regret, I should let you know that the British Government has not been successful in its recent Court case here involving deportation to Libya.” Blair thanked Gaddafi personally for the help he had given the British government in its attempt to secure deportation, and for the “excellent co-operation” between the two countries’ intelligence agencies. “Best wishes,” he signed off, “yours ever, Tony.”
Chastened, perhaps, by the courts’ verdict, the British side was anxious that their joint operations with Libya should never be made public. MI5 warned that steps should be taken jointly to “avoid being trapped in any sort of legal problem [and] to avoid also that those joint plans be discovered by lawyers or human rights organisations and the media”.
Meanwhile, in Tripoli, Belhaj and Al-Saadi were interrogated by two British intelligence officers. On one occasion, when left alone with his British visitors, Belhaj says he indicated that they were being covertly recorded, displayed the scars on his arms, and indicated through sign language that he was being suspended by his arms and beaten. The British clearly understood, he says: one gave a thumbs-up sign, while the other nodded her head.
Not that British intelligence believed the detention and interrogation of these men had made the UK – or indeed the world – a safer place. Among the papers discovered during the revolution was an MI5 memorandum prepared in advance of a visit to Tripoli in February 2005 marked “Secret, UK/Libya Eyes Only”, which contains a remarkably candid assessment. The detention of Belhaj and Al-Saadi had resulted in the LIFG being “cast into a state of disarray”, the memo states, before adding that these men had always jealously guarded the group’s independence from the worldwide jihadist movement, but in their absence, it was now falling under the influence of others who may be pushing it towards al-Qaida’s agenda.
Tony Blair’s “Dear Mu’ammar” letter was one of the first of the secret papers that came to light when the Libyan revolution exploded four years later. On 16 February 2011, inspired by the revolutions in Tunisia and Egypt, demonstrators gathered in the eastern Libyan town of Bayda, calling for the overthrow of Gaddafi. A police car was attacked and set ablaze at a road junction that is now known as The Crossroads of the Spark. It took more than eight months of vicious fighting, however, before the rebels, aided by Nato, toppled the regime. Belhaj played a role in the revolution, and was appointed leader of the militia that took control of the capital.
On 20 October, wounded and surrounded by rebels in Sirte, Gaddafi hid inside a drainage pipe. Grainy, jerking footage shot on a mobile phone captured the last moments of the despot whose friendship the UK had done so much to cultivate. He was dragged out, beaten, stabbed in the backside, and died. Three of Gaddafi’s sons died during the revolution, while Saif, captured by rebels, was abandoned by his friends in London and spent six years in jail.
One senior servant of the regime survived unscathed. Moussa Koussa had left the country after telling Gaddafi he needed medical treatment in Tunisia, where he boarded a private jet and flew to the UK. He immediately met with MI6 officers. Shortly afterwards, he left Britain, and settled in Qatar.
By then, the first secret cache of Tripoli intelligence documents had already been discovered, and some of their contents reported. With the role that MI6 played in the kidnap of Belhaj, Al-Saadi and their families now laid bare, Sir Richard Dearlove, the agency’s chief at the time, made a rare public statement in defence of MI6’s conduct. Government ministers had approved their actions, he said: “It was a political decision, having very significantly disarmed Libya, for the government to co-operate with Libya on Islamist terrorism.”
As a consequence of the discovery of the papers, Belhaj, Al-Saadi and several of the men who were detained and subject to control orders in the UK, or had their assets frozen on the basis of information being extracted from Gaddafi’s prisoners, brought damages claims against the British government and MI6 for the mistreatment they had suffered.
Al-Saadi settled his claim in 2012 when Britain paid him £2.23m in compensation, without admitting liability. Belhaj brought proceedings against not only the British government, but also against Allen and Jack Straw, who had been foreign secretary, and responsible for MI6, at the time that the agency assisted with his kidnap. Belhaj said he would settle for just £3 – £1 each from the government, Allen and Straw – providing both he and his wife received an unreserved apology. That was unlikely to happen, however: Scotland Yard had embarked upon a criminal investigation of the intelligence agency’s role in the Libyan rendition operations, and to make an admission of liability would be to invite arrests.
The investigation, codenamed Operation Lydd, ran for more than three years. Straw, who has always denied being complicit in unlawful rendition or detention, was questioned as a witness. Allen, who has declined to comment publicly, was the suspect. He faced potential charges of aiding, abetting, counselling or procuring kidnap, false imprisonment, assault or torture, and misconduct in public office. The police report contained evidence that Allen had been in contact with Koussa about the two rendition operations. However, in June last year, the CPS decided that there was insufficient evidence to bring charges against Allen.
The Libyan renditions were also examined during a short-lived inquiry into the UK’s involvement in the mistreatment of terrorism suspects after 9/11. It had been set up by the coalition government following the 2010 UK general election, but was shut down once the police investigation began. Instead, its work was handed to Westminster’s Intelligence and Security Committee. Four years later, the committee has yet to report. Belhaj’s British lawyers are currently seeking a judicial review of the CPS decision to not prosecute Allen, and the couple’s damages claim is yet to be heard in the high court. Government lawyers fought for years to have the claim struck out, finally losing at the supreme court earlier this year. A hearing is expected next year.
In 2011, Dame Eliza Manningham-Buller, who was director general of MI5 from 2002 until 2007, asked “whether the UK supped with a sufficiently long spoon” in dealing with the Libyan dictator. Indeed, the story of Britain’s attempt to make an ally of Libya has an uncomfortable postscript. At a remote depot in the south east of Libya, the National Transitional Council that was established after the death of Gaddafi discovered that the dictator had concealed large stocks of chemical weapons. They found mustard-gas artillery shells and precursors for the creation of other chemical weapons. Gaddafi, it turns out, had never really shut down his weapons programme. The UK and the US had done a deal with one of the worst dictators of the last century, and he had fooled them.
UN figures revealing more than 94,000 people have crossed the Mediterranean
ITALIAN politicians have condemned France over the migrant crisis and branded their own country the “refugee camp” of Europe as thousands enter the country.
Italy is grappling with an influx, with UN figures revealing more than 94,000 people have crossed the Mediterranean into the nation so far this year.
And more than 2,300 have died while trying to attempt the perilous crossing.
At its shortest distance, the EU country is a mere 290 miles from the coast of Libya, a largely lawless country which has seen the number of people smugglers rocket.
Given the short distance to the EU from the North African coast, Italy is dealing with a higher number of migrants on their shores when compared to other countries on the continent, particularly northern Europe.
Rome has pleaded with Brussels and its neighbours for help in dealing with the influx, with many politicians voicing their frustration over what they see as being abandoned to deal with the issue themselves.
President of political party Fratelli d’Italia, or Brothers of Italy, lamented the situation in the country.
Giorgia Meloni said: “Italy is now the refugee camp of Europe.”
Libya has become fractured and unstable, but oil production remains its key export
Fellow politician Alessandro Di Battista, from the M5S party, took a swipe at Paris over the situation.
He said: “France gets the oil while Italy keeps the boats.”
His comments are indicative over infighting among EU countries, with Italy viewing France as having its claws in Libya’s lucrative oil trade.
Once producing some 1.6 million barrels a day of the black gold, production plummeted after dictator Muammar Gaddafi was toppled by an international coalition in 2011.
During the action to topple Gaddafi, Paris led the NATO airstrikes with the French Air Force flying a third of NATO sorties.
Despite a shaky recovery, production has recovered to 1.4 million barrels a day, and makes up 80 per cent of Libya’s GDP.
Alessandro Di Battista, from the M5S party, took a swipe at Paris over the situation
Libya has become fractured and unstable, but oil production remains its key export and props up its fragile economy.
But Italy bitterly views France as profiteering off the oil, while it gets saddled with the migrants who come over in their thousands.
Last year French company Technip has signed a $500million (£380n) deal to refurbish an oil platform off the coast off Libya, which includes Libya’s National Oil Company.
Despite Italian firm ENI part of the consortium, France is seen at the forefront of the project, with Foreign Minister Jean-Marc Ayrault saying at the time: “The project demonstrates the desire of French companies to contribute to the petroleum sector, the backbone of the Libyan economy.”
The boost was widely seen as French attempt’s to prop up the economy, giving it a much needed boost.
But the current situation in the Mediterranean has led the desperate Italian government to toy with the idea of issuing 200,000 temporary migrant visas for onwards travel within Europe, in a bid to force other countries to take on more responsibility.
Last year French company Technip has signed a $500million (£380n) deal to refurbish an oil platform
And the latest measure to tackle the rising numbers has seen a fleet of Italian ships in a de facto battle with Libyan vessels in the Mediterranean Sea, after the Italian government ordered the Navy to try to stop ships making the journey across the water.
The Libyan National Army said in a statement: “Commander-in-Chief of the armed forces, Field Marshal Khalifa Haftar, issues orders to the Libyan naval bases in Tobruk, Benghazi, Ras Lanuf and Tripoli to confront any marine unit that enters the Libyan waters without the permission of the army.”
(EUobserver) French president Emmanuel Macron will host the leaders of warring factions of Libya on Tuesday in Paris, to bring peace and stability to the North African country, crucial in Europe’s drive to curb migration. The two leaders, Fayez al-Sarraj, head of the UN-backed government in Tripoli, and Khalifa Haftar, whose army controls large swathes of territory to the east, have so far been unable to agree on a power-sharing deal.
More than 88,000 migrants have crossed the Mediterranean to Italy so far this year, and more than a quarter of them arrived in June alone.
The numbers are higher than in the first half of last year.
Responding to an Italian plea for help, the EU has been helping to train Libyan coastguards.
Luxembourg’s Foreign Minister Jean Asselborn said “we have financed these coastguards and it’s right,” but that migrants were being brought back to Libya “to these camps we’ve seen pictures of”.
“Those are sometimes concentration camps, camps where people are raped, where there is no law.”
Italy has EU backing for a code of conduct that would regulate non-governmental organisations (NGOs) involved in rescuing migrants off the Libyan coast. Critics accuse NGOs of encouraging departures of migrants from Libya.
EU foreign policy chief Federica Mogherini said 5,000 migrants had returned home voluntarily from Libya this year under EU-funded schemes, more than double the number in the whole of last year.
The EU export restrictions will apply when there are “reasonable grounds” to suspect that people smugglers are the end users. Boats and motors in transit to Libya via the EU will also be restricted.
Italy delays citizenship law
Separately on Monday, Italian Prime Minister Paolo Gentiloni said conditions were not right to push through a bill giving citizenship to the children of immigrants.
The law would make some 800,000 people citizens and has already taken years to reach the upper house, or Senate.
Right-wing parties hailed the prime minister’s delay but migrant groups said they were bitterly disappointed.
Mr Gentiloni called the bill on citizenship “just”, but said he had run out of time and was putting it back until autumn.
Many of the new arrivals have come through Sicily, and when a local prefect on the island sent 50 migrants to a hotel in the village of Sinagra at the weekend, dozens of local mayors began a protest outside.
They argued that the facilities were insufficient and the number was far higher than the government’s agreement with local authorities to aim for 2.5 migrants per 1,000 of population. “We aren’t racist, or against migrants but the distribution has to to be fair,” said local mayor Vincenzo Lionetto Civa.
Migrant issue a hazard for Italian government
By Julian Miglierini, BBC News, Rome
For the normally meek Paolo Gentiloni, the U-turn on this bill that would have extended citizenship rights to the children of long-term immigrants has been quite dramatic – but not entirely surprising.
It had become obvious that a Senate debate would have sparked an internal conflict within his coalition.
It has also revealed how, in Italy’s current political climate, anything related to the issue of migration can become politically toxic.
With migrant arrivals solidly above last year’s numbers, the right-wing Northern League and populist Five Star Movement have stepped up anti-immigrant rhetoric.
What is Italy proposing?
Many European countries already grant citizenship to the children of migrants born on their territory, although the terms vary considerably.
Italy’s centre-left-led coalition is planning to offer citizenship to children either born in Italy or those who arrive before they are 12 and spend five years in formal education.
The controversial “ius soli” (right of soil) has taken years to reach Italy’s upper house of parliament and when it arrived in the Senate it became the focus of thousands of amendments aimed at halting its path.
It is currently difficult for immigrants to obtain Italian citizenship without an Italian parent.
However, the number of people becoming Italian citizens has risen – 201,501 acquired Italian citizenship in 2016 alone.
Right-wing Northern League leader Matteo Salvini said more than 7,000 migrants had arrived in southern Italy this weekend alone, adding that the Sicilian mayors’ protest was proof that people had had enough.
A note on terminology: The BBC uses the term migrant to refer to all people on the move who have yet to complete the legal process of claiming asylum. This group includes people fleeing war-torn countries such as Syria, who are likely to be granted refugee status, as well as people who are seeking jobs and better lives, who governments are likely to rule are economic migrants.
(Spiegel) Summer offers perfect conditions for migrants seeking to cross the Mediterranean from North Africa to Europe. Aid organizations are trying to prevent them from drowning, but the EU has partnered with Libya to stop them.
It is a peaceful morning on the Mediterranean. The sky is deep blue and gentle waves roll out to the horizon – a perfect summer’s day.
The image, though, is ruined by the gray patrol boat, double-barreled cannon sitting near the bow with heavy machine guns positioned further back. The Kifah(Battle) is the only ship fit for the high seas in the Libyan Coast Guard’s possession.
The ship left the Libyan capital of Tripoli early in the morning. Its job is to combat human traffickers and to intercept the floating death traps that the heavily armed gangs use to send migrants northward by the thousands. At the helm is Captain Abujella Abdul-Bari, 49, a stocky man with four golden stripes on the sleeve of his uniform who hails from a family of fishermen and has spent 30 years in the Navy.
At around 7:30 a.m., central command radios him the coordinates where a boat full of refugees is apparently to be found. Abdul-Bari accelerates to 20 knots, yet shortly before the Kifah reaches the spot, where a wooden boat with hundreds of migrants onboard is indeed motoring through the waves, a third ship pulls up on the starboard side, the Sea Watch 2, operated by the Berlin-based aid organization Sea Watch.
The Kifah’s engines rev up to top speed as Abdul-Bari curses the Germans: “They are trying to get to the refugee boat before us.” The Kifah and the Sea Watch 2are on a collision course.
This scene, filmed by a SPIEGEL TV team onboard the Kifah, is symptomatic of the vast Mediterranean tragedy – and of the deadly dilemma that European governments have been unable to solve. (A German trailer for the film can be seen here. The full-length, German-language documentary will air on German broadcaster RTL on Sunday, June 26 at 10:30 p.m.) Now in summer when the sea is calm, tens of thousands of migrants will again try to reach the EU via the so-called central Mediterranean route from Libya to Italy.
Attracting Refugees Like a Magnet
The EU does not want these people. The refugee problem is politically explosive for the Union, in part because Hungary, Poland and the Czech Republic do not want to take any in, leaving Italy to deal with the problem alone. As a result, the European Commission initiated proceedings against those three countries last week.
But Europe can’t hold the refugees back either. While more than 181,000 migrants made it to Italy last year, over 4,500 died on the way. So far this year, many more than 40,000 have already made it with over 1,000 thought to have drowned trying.
Graphic: Intercepted migrant boats off the Libyan coast
The figures are at least 30 percent higher than during the same period in 2016, a function of the land route through the Balkans having been largely blocked. Another factor, critics say, is that the dozen or so rescue boats from Western countries positioned directly off the African coast attract refugees like magnets. Operated by relief organizations, the boats take a majority of the migrants from the refugee vessels and shuttle them to Italy.
There are women, children and babies among them; not so many Syrians, but mainly young men from African countries like Ghana, Nigeria or Senegal. They are fleeing poverty, hopelessness and in some places, hunger.
The result has been a quarrel between relief organizations on the one hand, and politicians and border control agencies on the other, about how to deal with these people. One side wants to do all they can to prevent more from dying. The other wants to deter people from trying: They want the Libyans to intercept the boats and bring them back to the mainland. The African mainland.
To that end, the EU has provided 200 million euros to support the Libyan Coast Guard and Libya has recently requested armed ships and equipment from Brussels. Abujella Abdul-Bari has become Europe’s man on Africa’s shores: He does the Europeans’ dirty work for them.
‘A Taxi Service for Refugees’
The experienced sailor doesn’t veer off course and the Kifah just misses the bow of the Sea Watch 2 as it reaches the refugees’ boat, avoiding a catastrophe by just a few meters.
On the ship’s bridge on this day in mid-May, Abdul-Bari complains about the aid workers from Germany and other countries who, in his opinion, do the traffickers’ work for them. The migrants used to have to overcome the 160 nautical miles to the Italian island of Lampedusa. Today, they only need to get out of Libya’s 12-mile territorial zone and into the 12-mile contiguous zone, where help is waiting. “Everyone who makes it to Italy will call their family and tell them that Sea Watch is only 12 miles away from the coast. You can come.” It’s a “taxi service for refugees,” says Abdul-Bari.
An analysis for the EU border protection agency Frontex echoes these sentiments: The migrants will risk the dangerous crossing because they know they can rely on humanitarian assistance,” the report concludes.
The captain is now driving parallel to the refugee vessel and orders them to shut off the engine. The Kifah then pulls up along side it.
The refugee boat appears relatively safe. The engine works and there is only a little water coming in at the propeller shaft, which is relatively normal for a set-up such as this one. The boat was technically not under duress but it could have capsized as it was clearly overloaded.
Migrant smugglers are less and less likely to make the effort to use old fishing boats like this one for the short journey. Instead, they are opting for large inflatable rafts made just for this purpose in China. Chinese companies deliver them for a few hundred euros in containers via the Freeport Malta to places like the Libyan port city of Misurata.
It is a well-established scheme, and the Chinese platform Alibaba.com acts as a sort of Amazon.com for migrant smugglers. On the site, for example, the company Weihai Dafang of Shandong advertises various versions of a product called, “inflatable boats for refugees” – up to nine meters long with enough space for 50-60 people. Last week, the boats were on sale, with a 30-day delivery.
No Legal Way to Stop Deliveries
Migrant smugglers often cram 150 people onto such boats, despite the PVC used in their construction being just about 1 millimeter thick. A single bit of chafing – which often happens where the tubing meets the floor – could mean death for everyone on board. According to an EU report, however, there is no legal way to stop these deliveries from China.
Captain Abdul-Bari commands most of the 497 migrants from the wooden fishing boat to board the Kifah. Among them are 277 Moroccans, but also Bangladeshis, many of whom fly to Libya before being placed on a boat by the migrant smugglers.
Most of the migrants don’t understand what has just happened. One man from Bangladesh says he is “confused.” The smugglers had told him that the Italians would pick them up, yet he can see the German ship only 150 meters away and the ship he has just boarded is flying the Libyan flag.
Slowly, word spreads that the Kifah is bringing everyone back to Libya. The men are stunned and explain in vain that they paid thousands of dollars to the smugglers for the passage to Italy. Some of the women begin to cry. An officer tries to calm everyone: “The smugglers cheated you,” he tells them. Slowly, theKifah begins the journey back to shore and the wooden boat follows.
Many of the refugees will likely be locked up in decrepit Libyan detention centers, many of which are repulsive facilities, and later deported to their homelands; others will try again.
It is also a disaster for the EU, says Ruben Neugebauer, the spokesman for Sea Watch and an adversary of Abdul-Bari. The Libyan captain’s maneuver across the bow of Sea Watch 2 was extremely dangerous, he says – and the staff of the aid agency are not easily frightened. Neugebauer himself is actually a war photographer by trade and when SPIEGEL reaches him by phone, he is near the front in the Iraqi city of Mosul, with bombs audible in the background.
‘I Will Continue’
“The EU is trying to seal off the Mediterranean route,” says Neugebauer, unfazed by the detonations. They don’t want witnesses to “the policy of letting people die.” That is why, he goes on, aid organizations are being smeared with the absurd accusations that they are cooperating with smugglers. It’s not the ships off the coast that are causing people to flee, Neugebauer says, rather it’s the misery at home that drives them to flee.
Furthermore, he says, it is irresponsible to return migrants to Libya. There is a civil war raging, the government in Tripoli has little power, militants and warlords control large sections of the country, a Russian-backed general controls parts of the east and in the middle of all the chaos is Islamic State. In many refugee camps, men are abused and killed and women are raped.
Europe has to combat the problems that cause people to flee in Africa, instead of those who are fleeing, says Neugebauer. And the Libyan government, he says, is not a serious partner for the EU; it is little more than a party to the civil war.
On a lonely beach near Tripoli, a young man in a red shirt is crouching down. He is afraid of people, he says, after everything that has happened. Ahmed, 18, is one of the sons of the Kifah’s captain. A few months ago, he says, he was kidnaped by smugglers. They beat and tortured him and shot him in the leg. Then they let him go with a message for his father: The captain should stop interfering in their business.
Abujella Abdul-Bari sits on board and looks at the water. He has six daughters and two sons, and he is aware of the dangers. But he also has his orders: “I will continue,” he says.
Yet doing so won’t really be of much help to European policymakers. Ruben Neugebauer of Sea Watch notes that the United Nations has warned of an enormous famine in parts of Africa, one that could affect more than 20 million people. “Many of them will end up in our boats,” he says.
General Khalifa Haftar, commander in the Libyan National Army (LNA), leaves after a meeting with Russian Foreign Minister Sergei Lavrov in Moscow, Russia, November 29, 2016. REUTERS/Maxim Shemetov/File Photo
Russia appears to have deployed special forces to an airbase in western Egypt near the border with Libya in recent days, U.S., Egyptian and diplomatic sources say, a move that would add to U.S. concerns about Moscow’s deepening role in Libya.
The U.S. and diplomatic officials said any such Russian deployment might be part of a bid to support Libyan military commander Khalifa Haftar, who suffered a setback with an attack on March 3 by the Benghazi Defence Brigades (BDB) on oil ports controlled by his forces.
The U.S. officials, who spoke on condition of anonymity, said the United States has observed what appeared to be Russian special operations forces and drones at Sidi Barrani, about 60 miles (100 km) from the Egypt-Libya border.
Egyptian security sources offered more detail, describing a 22-member Russian special forces unit, but declined to discuss its mission. They added that Russia also used another Egyptian base farther east in Marsa Matrouh in early February.
The apparent Russian deployments have not been previously reported.
The Russian defense ministry did not immediately provide comment on Monday and Egypt denied the presence of any Russian contingent on its soil.
“There is no foreign soldier from any foreign country on Egyptian soil. This is a matter of sovereignty,” Egyptian army spokesman Tamer al-Rifai said.
The U.S. military declined comment. U.S. intelligence on Russian military activities is often complicated by its use of contractors or forces without uniforms, officials say.
Russian military aircraft flew about six military units to Marsa Matrouh before the aircraft continued to Libya about 10 days later, the Egyptian sources said.
Reuters could not independently verify any presence of Russian special forces and drones or military aircraft in Egypt.
Mohamed Manfour, commander of Benina air base near Benghazi, denied that Haftar’s Libyan National Army (LNA) had received military assistance from the Russian state or from Russian military contractors, and said there were no Russian forces or bases in eastern Libya.
Several Western countries, including the U.S., have sent special operations forces and military advisors into Libya over the past two years. The U.S. military also carried out air strikes to support a successful Libyan campaign last year to oust Islamic State from its stronghold in the city of Sirte.
Questions about Russia’s role in north Africa coincide with growing concerns in Washington about Moscow’s intentions in oil-rich Libya, which has become a patchwork of rival fiefdoms in the aftermath of a 2011 NATO-backed uprising against the late leader Muammar Gaddafi, who was a client of the former Soviet Union.
The U.N.-backed government in Tripoli is in a deadlock with Haftar, and Russian officials have met with both sides in recent months. Moscow appears prepared to back up its public diplomatic support for Haftar even though Western governments were already irked at Russia’s intervention in Syria to prop up President Bashar al-Assad.
A force of several dozen armed private security contractors from Russia operated until February in a part of Libya that is under Haftar’s control, the head of the firm that hired the contractors told Reuters.
The top U.S. military commander overseeing troops in Africa, Marine General Thomas Waldhauser, told the U.S. Senate last week that Russia was trying to exert influence in Libya to strengthen its leverage over whoever ultimately holds power.
“They’re working to influence that,” Waldhauser told the Senate Armed Services Committee on Thursday.
Asked whether it was in the U.S. interest to let that happen, Waldhauser said: “It is not.”
One U.S. intelligence official said Russia’s aim in Libya appeared to be an effort to “regain a toe-hold where the Soviet Union once had an ally in Gaddafi.”
“At the same time, as in Syria, they appear to be trying to limit their military involvement and apply enough to force some resolution but not enough to leave them owning the problem,” the official added, speaking on the condition of anonymity.
Russia’s courting of Haftar, who tends to brand his armed rivals as Islamist extremists and who some Libyans see as the strongman their country needs after years of instability, has prompted others to draw parallels with Syria, another longtime Soviet client.
Asked by U.S. Senator Lindsey Graham whether Russia was trying to do in Libya what it did in Syria, Waldhauser said: “Yes, that’s a good way to characterize it.”
A Western diplomat, speaking on condition of anonymity, said Russia was looking to back Haftar, although its initial focus would likely be on Libya’s “oil crescent.”
“It is pretty clear the Egyptians are facilitating Russian engagement in Libya by allowing them to use these bases. There are supposedly training exercises taking place there at present,” the diplomat said.
Egypt has been trying to persuade the Russians to resume flights to Egypt, which have been suspended since a Russian plane carrying 224 people from the Red Sea resort of Sharm al-Sheikh to St Petersburg was brought down by a bomb in October 2015. The attack was claimed by an Islamic State branch that operates out of northern Sinai.
Russia says that its primary objective in the Middle East is to contain the spread of violent Islamist groups.
Russian Foreign Minister Sergei Lavrov pledged this month to help unify Libya and foster dialogue when he met the leader of the U.N.-backed government, Fayez Seraj.
Russia, meanwhile, is also deepening its relations with Egypt, which had ties to the Soviet Union from 1956 to 1972.
The two countries held joint military exercises – something the U.S. and Egypt did regularly until 2011 – for the first time in October.
Russia’s Izvestia newspaper said in October that Moscow was in talks to open or lease an airbase in Egypt. Egypt’s state-owned Al Ahram newspaper, however, quoted the presidential spokesman as saying Egypt would not allow foreign bases.
The Egyptian sources said there was no official agreement on the Russian use of Egyptian bases. There were, however, intensive consultations over the situation in Libya.
Egypt is worried about chaos spreading from its western neighbor and it has hosted a flurry of diplomatic meetings between leaders of the east and west in recent months.
(EUobserver) The Maltese EU presidency wants a deal with Libya to curb migrant flows that would be loosely modelled on the EU-Turkey agreement.
A Maltese EU presidency spokesman told this website on Thursday (12 January) that Valletta and other EU capitals would examine the idea after Maltese prime minister Joseph Muscat spoke of it earlier in the day.
The Libya accord was “something the presidency will look into together with all the member states”, he said.
Muscat himself had told press in the Maltese capital that there was “appetite” at EU level, including from Germany’s chancellor Angela Merkel, to “replicate the Turkey deal in the southern Mediterranean”.
He said that “Libya is on the brink of being a failed state”.
“I think that there should be a political signal from the European Union that it is ready to engage with Libya,” Muscat said.
The spokesman told EUobserver that Malta wanted “the same political focus on the central Mediterranean, including Libya, as there was on Turkey”.
He added that the potential Libya pact “would obviously not be identical to the Turkey deal, but could be based on a similar approach”.
The EU’s migrant swap deal with Turkey was signed off last March to stop people from crossing the Aegean to reach the Greek islands.
The EU agreed, in exchange, to finance refugee projects in Turkey to the tune of several billion euros and to lift short-term visas for Turkish nationals.
The EU had a migrant deal with Libya in 2010 while Muammar Gaddafi, its late leader, was in power.
Muscat noted that the Gaddafi-era legal framework was still in place.
Libya’s UN-backed unity government has limited reach and little state control throughout a country wrecked by years of lawlessness, however.
The Maltese proposal comes days after Italy reopened its embassy in Libya’s capital city Tripoli – a first for any Western country.
Italy’s foreign minister Angelino Alfano at the time described the embassy as a move to impose “more controls on migrant departures”.
Europe’s director of the UN refugee agency (UNHCR), Vincent Cochetel, has described the Libya plan as a non-starter, however.
“The EU Turkey agreement cannot be a blueprint for Libya. First there is no government in Libya, so let’s not even talk about,” he told MEPs in the European Parliament’s civil liberties committee.
Over 180,000 people seeking better lives reached Italy from the north African coast in 2016.
Another 1,100 have arrived so far this year. Eleven have already died.
Fears are emerging that the upcoming spring and summer months may trigger a spike in the number of arrivals.
“Come next spring, we will have another crisis,” said Muscat.
(ECO) Um avião líbio com 118 pessoas a bordo foi forçado a aterrar em Malta, num possível caso de sequestro. Dois suspeitos terão ameaçado fazer explodir o aparelho.
Um avião líbio com 118 pessoas a bordo foi forçado a aterrar em Malta, naquilo que se suspeita ser um caso de sequestro. O aparelho, um A320, pertence à companhia aérea libanesa Afriqiyah Aiways e estaria a fazer a ligação de Sebha a Tripoli, quando foi desviado para o Aeroporto Internacional de Malta, na região de Luqa.
Segundo informações da BBC, o caso envolve dois suspeitos que ameaçam fazer explodir o avião. O jornal The Guardianindica que os atacantes terão uma granada de mão na sua posse.
A notícia de um “potencial sequestro” foi avançada no Twitter pelo primeiro-ministro maltês, Joseph Muscat: “Fui informado de uma potencial situação de sequestro de um voo interno da Líbia, desviado para Malta. Operações de socorro e emergência estão prontas a atuar”, escreveu.
A aterragem forçada já foi confirmada pelo Aeroporto Internacional de Malta, que fala de um “imprevisto” na atividade: “Equipas de emergência foram enviadas”, comunicou o aeroporto no Twitter. Segundo a BBC, é possível avistar agentes e veículos das forças especiais no terreno.
(MEMO) Almesryoon reported that a map of an airbase it said was located near the Libyan city of Benghazi which will be transferred to Russia in exchange for arms supply, Monday.
According to Western reports, General Khalifa Haftar’s recent visit to Moscow along with his talks with Russian officials revolved around the need to import weapons in return for granting Moscow logistical and military privileges inside the Libyan territories.
Haftar wants to win Moscow’s support and recognition as the sole candidate for the country’s leadership as Russia’s influence in the world and the Middle East is on the rise, Russian Nezavisimaya Gazeta reported.
The newspaper said, Haftar may have submitted an initial list of the required weapons to the Russian Defence Ministry, and won a promise to receive the weapons in case an arms embargo was removed.
Haftar met with Russian Foreign Minister, Sergei Lavrov, and Deputy Foreign Minister, Mikhail Bogdanov and representatives of the Russian Defence Ministry.
This is the second visit by the General to Moscow this year.
…Goldman Sachs would only lose in extraordinary circumstances…
Francisco (Abouaf) de Curiel Marques Pereira
“the Vampires of Wall Street” is the name of a book on Goldman Sachs
(BBG) Goldman Sachs Group Inc. didn’t dupe Libyan officials into investments that lost $1.2 billion, a London court ruled, putting to rest claims the bank leveraged its reputation as well as lavish meals and escorts to win the sovereign wealth fund’s trust.
The investment bank did not have “undue influence” over the Libyan Investment Authority when it pushed for what were ultimately money-losing derivative trades, and there is no evidence Goldman Sachs reaped excessive profits, Judge Vivien Rose said on Friday.
The Libyan Investment Authority, a $60 billion oil wealth fund set up under former dictator Moammar Qaddafi, sued Goldman Sachs saying it was misled into signing derivative deals it never properly understood. The trades ended up being virtually worthless after the company shares they were linked to fell in the 2008 crisis.
“Their relationship did not go beyond the normal cordial and mutually beneficial relationship that grows up between a bank and client,” Rose said in a written decision.
…AhAhAh…If the client could read them and understand them…AhAhAh…
…And I suspect that in this case the client could do neither…
…I Francisco, that have been in the Markets for more than fifty years by now, sometimes have trouble in reading and understanding some deivatives…
…Now imagine a non professional…
Francisco (Abouaf) de Curiel Marques Pereira
(BBG) Selling derivatives is basically a miserable life. If you’re selling a car, you show the customer the car, and you’re like, look at this car. It’s blue, it has some horsepower, it can make both left and right turns, the seats are soft, it has twelve cupholders. The customer gets in the car, drives it around the block, turns on the windshield wipers. He has an intelligible experience of the car that he can relate to other cars he’s encountered. If he likes the car, he gives you some money, and you give him the car. He values the car more than he values the money. You value the money more than you value the car. Everyone wins.
If you’re selling a non-expert customer a derivative, you show him a termsheet, and you’re like, look at this derivative. It’s a cash-settled forward on $600 million of Citigroup stock, it has an embedded put to floor your downside at zero, there’s an upside cap at 140 percent on 90 percent of the trade, it has a nine-month lookback. The customer … nods. “When do I get the shares,” he asks. There is an awkward silence. He has no intelligible experience of anything that you are talking about. His goals are simple: He wants to give you a small amount of money to get back a larger amount of money, without much risk. Your goal is … more or less to persuade him that he’s getting that? Preferably without actually lying? While also making a lot of money for yourself? But you are limited by the constraints of economic reality: Upside comes with downside, leverage comes with risk, profit to you is cost to him. Eventually he gives you money, and you give him a derivative that is probably worth less than the money. Maybe he values it more than he values the money, but in expectation, that will change. He’ll probably call you to complain when it does. Nobody exactly wins, though you have made a profit, which is not nothing.
On Friday, the Libyan Investment Authority lost its lawsuitagainst Goldman Sachs over some derivatives trades. We talked about that case a couple of weeks ago, and I should disclose that I worked at Goldman Sachs, selling derivatives, and in fact I know some of the characters who appear in the judge’s decision. The basic issue is that Goldman sold the LIA $1.2 billion worth of call options on some stocks, mostly of big international banks (starting with Citigroup), in early 2008. The call options would only pay off if the stocks went up. The stocks went down — it was 2008 — and the LIA lost all the money it paid for the call options. So it sued, and now it has lost.
That decision is fascinating reading, and dredges up some memories for me. Here, for instance, is an e-mail that Goldman coverage banker Youssef Kabbaj sent to his colleagues, including the guys responsible for structuring and pricing derivatives trades for Libya:
We showed the structure to the chairman of LIA yesterday. He likes the idea of (i) getting exposure to Citi (ii) buying a lookback option on the first 6 months but he thinks that LIA has enough cash not to have to enter into any leveraged structure. On this, his [Chief Investment Officer and Chief Operating Officer] disagree. After some discussion, we agreed to meet this Sunday again to look at the two options: leveraged and unleveraged. GS is to prepare a two pagers in plain English to explain the structures to the chairman. They also specifically asked to have at least 50% participation on the upside. They are flexible on the 5 time leverage so we can do 4 times if needed.
I suppose that to a lay audience that sound like finance guys talking about finance to other finance guys, but as a former derivatives structurer my reaction was: arrgghh. Those words all sort of mean things, but it’s not clear what they mean, particularly in that combination, or what the client’s actual economic goals could be. Kabbaj was a coverage banker, not a derivatives structurer, and he was talking to the chairman of the LIA, also not a derivatives structurer. “What about a lookback,” asked Kabbaj, I assume. “Don’t mind if I do. How bout some leverage?” “Sure, leverage it up!” His colleagues were nonplussed. What, exactly, was he talking about with the client? How would those vague conversations about the LIA’s hopes and dreams translate into an actual deal?
But eventually a Citigroup trade was agreed, as far as anyone could make out. The LIA would pay Goldman $200 million for three-year call options on $600 million of Citigroup stock, with some bells and whistles. The LIA team got its board to approve, with a presentation that … didn’t really describe the trade? I mean, it tried to — it may or may not have been prepared with help from the Goldman team — but it just didn’t quite. It waved in the direction of the actual trade. It got the economics more or less right. I think. It was kind of gibberish. It did, however, come with an amazing — and accurate — payoff table, prepared by Goldman Sachs:
The Citigroup Board Memo then sets out a payoff table which has been cut and pasted from another document. This is said to show a summary of the possible outcomes of the trade for guidance purposes. The table shows the internal rate of return that would be achieved by different percentage increases in the value of the shares. The lowest figure on the table shows what would happen if there were a 30% increase in price so that the price of the shares at maturity was $32. The return in that situation would be $182,370,821 which, since the initial premium is $200 million, would give a negative cumulative and internal rate of return. The posited share price increases shown in the table then rise in increments of 10% to 280% which would result from a share price of $93 and generate a return of over $1.7 billion.
This is not exactly a surprise. If you pay $200 million for an at-the-money call option on about 24.9 million shares of Citigroup stock, which was then trading at about $24.45, then you’ll only get any money back if the stock goes up. If Citigroup finishes at $24.45 you will get back zero. (And be out $200 million.) You need the stock to go up to about $32.50 to break even: Then your call options will finish up in the money by $8.05 per share, or about $200 million total, earning back your premium. If the stock is up only 30 percent, you will lose money. If it’s up 20 percent, you will lose more money. (About $79 million.) If it’s up 10 percent, you’ll lose even more. (About $139 million.) If it’s flat, or down, you will lose the full $200 million. (You can’t lose any more than your premium.) Sometimes stocks go down! This table started with the stock being up 30 percent, which would be a small loss for the LIA, and ran all the way to up 280 percent — two hundred eighty percent — which would be a huge gain for the LIA. The rest of the range from up 30 percent down to, you know, down 100 percent, was omitted from the chart. Three years after that board meeting, Citi’s stock was down 81 percent. The LIA lost its entire $200 million, and repeated that feat on all of its other disputed option trades with Goldman.
You can see why the table cut off at up 30 percent! Everything to the left of that was depressing; why talk about it? But it doesn’t seem like Goldman was the one trying to bury the bad news. Here is a passage in which the judge, Dame Vivien Rose, questions a junior member of the LIA team, Gamal El Harati, about Mustafa Zarti, the deputy chairman and main decision-maker on these trades:
MRS JUSTICE ROSE: When you said, “If we put negatives in the report, Mr Zarti would say, ‘You have to remove that'”, what do you mean by “negatives in the report”?
A. The, like, pros and cons of a certain investment. So say, for example, that we believed that the stock price — one of the risks of this investment is that the stock price, for example, might go down or we are going to be giving up the dividends, he’s like, “You don’t have to put that in; I mean, I will explain it”.
The LIA was full of optimists. And Goldman let them be optimistic. A lot has been written about the efforts of Kabbaj, the Goldman coverage banker, to woo the LIA through the traditional techniques of wining and dining, but his most impressive marketing move may be this e-mail:
Early in January 2008, Mr Kabbaj sent Mr Matri (a member of the Equity Team) an email with the subject heading ‘Why it may be a good time for the LIA to buy some Financials?’. He attached to the email an article from the Financial Times on 4 January 2008 describing what the author calls “the latest lemming-like craze to hit Wall Street: the repairing of many firms’ badly depleted capital accounts by taking money from deep-pocketed, state-owned foreign-investment funds”.
Kabbaj tried to get a sovereign wealth fund to invest in bank stocks by telling them that sovereign wealth funds investing in bank stocks was a “lemming-like craze.” And it worked! That shouldn’t work.
Last time we talked about this case, I said that the essential problem — the basis for LIA’s complaint — was that Kabbaj was too good a salesman. He had “undue influence” on the LIA, it now claims; its staffers couldn’t resist the allure of his derivatives. He befriended them, they trusted him, and without any independent ability to judge the merits of these trades, they just did whatever he said. The judge didn’t buy it:
In cross-examination the [LIA] Equity Team members accepted that they understood at all times that Mr Kabbaj was a salesman for Goldman Sachs and that his job was to sell investments to the LIA from which Goldman Sachs would make money. Some of them gave evidence that they were a little guarded about Mr Kabbaj’s obvious attempts to ingratiate himself with the team
Even the fact that Kabbaj spent so much time and money on entertaining the Libyans is an ambiguous fact: “Indeed the perceived need to keep providing expensive entertainment in order to maintain the relationship rather negates the idea that the relationship had grown into one where Goldman Sachs could exercise undue influence.”
But beyond her factual skepticism, the judge’s decision reflects doubt that the law really concerns itself with salesmen who are too good — that a salesman can exercise “undue influence” just by doing a really good job of befriending his customers. She describes an earlier effort by Goldman to guilt the Libyans into finalizing the deal:
They also complain that Mr Vella suggested to Mr Kabbaj that he play what the LIA referred to as ‘the emotional card’. The LIA say that Goldman Sachs took advantage of the close friendship that had developed between Mr Kabbaj and the Equity Team by telling Mr Kabbaj to say to them that he might get into trouble if they did not commit to a deal. Again, I do not consider it is fair to criticise Goldman Sachs for being concerned that the LIA might simply walk away from any deal leaving Goldman Sachs unable to recoup the costs of its weeks of effort. As to the ‘emotional card’ I am sure that it would not have helped Mr Kabbaj’s career with Goldman Sachs if, after all that had happened, he did not manage to bring a deal to fruition.
This is all very clear-eyed. Goldman had spent time and money building a relationship, and wanted to be repaid with a profitable deal. Kabbaj was the actual person most responsible for that relationship, and so had the most at stake in actually completing a profitable deal. The relationship was about money, and he wanted his money. It’s a bit rude to put it like that, as you’re actually building the relationship. But once the relationship is gone — once you’re in court — that’s really the only way to look at it.
Besides claiming that Kabbaj was too good a salesman, the LIA also claims that, in effect, it was too good a client. It had a huge pile of money that was burning a hole in its pocket, with a mandate to invest quickly and no particular idea of what it was doing. It was incapable of understanding the complicated trades that Goldman showed it, and so it was just misled by Goldman into doing terrible trades. This seems … mostly wrong. There is definitely evidence that the LIA didn’t quite understand what it was doing. That memo to its board about the Citigroup trade was nonsense, and reflected the LIA’s most fundamental misunderstanding here: Apparently it thought that it was buying shares, and was outraged to find out that it was only buying a derivative.
But all in all, the record looks like LIA wanted to get leveraged long exposure to financial stocks, and Goldman tried to get it that exposure in the most plausible possible way. Just lending the LIA money to buy a bunch of financial stocks was not really feasible: If the stocks went down, Goldman would have trouble enforcing its loan. So it came up with a derivative structure to get as close as possible to what the LIA wanted. (Also to make the most possible money for Goldman, though the judge has no problem with that: “The fact that a bank prefers the client to do a deal which generates a higher profit does not show that something unusual or inappropriate was happening.”) And it explained the structure to the LIA. And the LIA … sort of understood? In broad strokes? It was apparently missing a big element — that it would never actually get the shares — but that doesn’t seem to have been Goldman’s fault, and more importantly, it just didn’t matter that much. Even if the LIA had gotten the trade it thought it was getting — borrowing money to buy shares on a levered basis, and buying a put to limit its downside risk — it would have ended up in the same place: rapidly losing all of its money. The particular form of the trades was not the problem; the problem was that LIA really wanted levered long exposure to financial stocks just before the global financial crisis hit. In some ways the LIA’s continued obsession with actually getting the shares shows just how naive it was: It’s an irrelevancy, but it’s the only thing that the LIA focused on. “What drove Mr Mustafa crazy was the fact that we had no shares in the trades that we did with Goldman Sachs,” recalls one LIA employee.
The other naive thing that the LIA did is that when Goldman told it that its derivative would cost $200 million, it just … paid the $200 million. You’re not really supposed to do that either. The bespoke over-the-counter derivatives market allows for a certain amount of haggling. You could say, for instance: “What about $190 million?” You could engage an independent consultant to model up the trades and come up with a fair price. Or you could just go to another bank, show them the term sheet, and ask them to give you a better price. (This is rather rude!) Just accepting whatever price you get, with no check on its fairness, is a bit silly. But it’s not that silly. It happens. “Even if the profits were greater because of the LIA’s failure to challenge the prices it was offered,” writes the judge, “that would not be unusual and so not something from which an inference of undue influence could arise.” There’s a lot of discussion about how much money Goldman actually made on the trade, and whether that profit was so crazy as to itself prove undue influence, and I will summarize it by saying: The profit was very large, but not obviously inappropriate.
This case boils down to the question: If you are a bank, and you are smart and good at finance, and you come across a customer with a gigantic pile of money, and the customer isn’t especially sophisticated at finance, and you rub your hands together in glee about how much money you can make, and you wine and dine the client, and you get the client to do some big trades, and the customer doesn’t exactly understand every detail of the trades, and they work out badly for the client, and they look in hindsight kind of stupid, but they make you a lot of money — is that bad? There is a long tradition, in the financial industry and the law, of thinking that it’s just fine. It’s unseemly, sure; you don’t talk about it quite so explicitly. But the life of a derivatives salesman is hard; lots of potential trades never work out, and lots of customer are tough and sophisticated and wring every penny of profit out of you before agreeing to a trade. When you find a customer who will do huge trades at huge profit margins without complaint, that makes up for a lot of troubles elsewhere, and you will buy that client all the fancy dinners it can eat. And you will trust in the longstanding assumption that the customer is an arm’s-length counterparty, responsible for looking out for its own best interests just as you are responsible for looking out for yours. That assumption has been questioned a lot recently: After the financial crisis, it is no longer entirely satisfying to say that customers dealing with banks should look out for themselves, and that banks have no responsibility for protecting customers from themselves. But, in the U.K. at least, it is still the law.
That is: If someone pays you $100 million for a derivative, and your profit margin is 3 percent, then he’s getting back a derivative worth, in expectation, $97 million. You can critique this math as a matter of derivatives math — what does “expectation” mean, anyway? — but it has some force.
Mr Magnifico is currently an Executive Director in the Equity Derivatives team which is part of the Investment Banking Division of Goldman Sachs. As a junior analyst at the time of the Disputed Trades, his role was primarily one of co-ordinating the various tasks necessary to propose, revise and execute the trades.
Some time after that, he came to New York and worked on the same desk as me. Dmitri Potishko, who was at the time of the trades an equities trader in New York responsible for pricing exotic equity options, also appears in the opinion; he was a trader who worked with my desk for much of the time I was there. I probably met one or two of the other characters in the opinion too. I don’t recall ever discussing Libya with any of them.
From the decision:
The response to this was some confusion within Goldman Sachs about which of the several different iterations that had been discussed the LIA were in fact interested in. Mr Devenish, a senior person at Goldman Sachs who had been copied into the exchange, said in response “I really cannot keep up with these iterations and personally I think we should call a timeout on this stuff until Andrea has met them face to face”.
Andrea is Andrea Vella, a Goldman partner with derivatives expertise. Later requests from Kabbaj for more prices and structures “brought a rebuke” from a derivatives structurer, “reminding him that it was part of his role to moderate the demands placed by the client on the Goldman Sachs trading team.”
Here’s another fun e-mail that Kabbaj sent:
“Just spoke with Abdulfettah. On EdF, LIA would like to compare three strategies:
– delta one with lookback paid by dividends
– leveraged similar to Citi
– caesar or any other one we recommend
They are looking to see expected payoffs for 100 m euros and [internal rates of return] as functions of final price.
Enrico, should we meet tomorrow to prepare these?”
The judge comments:
Mr Enaami said in his witness statement that this could not be an accurate record of what they discussed or what he had requested because the only ‘caesars’ of which he was aware were Roman emperors and salads. That does not mean that Mr Kabbaj fabricated the discussion. There is nothing unusual in a banker having a discussion with a client using layman’s terms and then reporting it back to his colleague using terms of art with which he knows his colleague is familiar. The fact that Mr Kabbaj may not have referred to a potential structure as a ‘Caesar’ when talking to Mr Enaami does not mean that he did not explain what it actually was to Mr Enaami or that Mr Enaami did not understand it, even if he did not know it was called a Caesar among the banking fraternity.
A “Caesar” is a silly name for a pre-paid put. (I believe it’s a quasi-acronym for “cash enhanced share repurchase.”) I mean, presumably the client didn’t say “delta one” either. That e-mail boils down to “let’s show them three choices: Just buying the stock, buying calls, or selling puts.”
Those really are three ways to get exposure to a stock! But it seems a bit weird to be indifferent among them. And I would not want to explain the difference. Not because it’s hard — though I suspect that you make it harder on yourself by using terms like “Caesar” and “delta-one” — but because some nuance is going to go missing in the explanation, and later it’s something they’ll fixate on.
Principally a lookback feature that “gave the LIA the advantage of any temporary dip in the price in the early months of the contract and conversely generated a greater risk for Goldman Sachs that there would be a larger positive difference between the strike price and the maturity date price.”
It also made the trade weirder, more expensive, and harder to compare to simple derivative pricing models.
Oh, by the way, I say “call options,” though they were documented as forwards plus puts. Those are the same. Also some of the trades — not the Citi one — were actually call spreads, where LIA’s upside was capped at some level well above the initial price.
Here you go:
“Therefore, we would like to inform you that investment in this Bank may be carried out by dealing with Goldman Sachs, while applying the following strategy:
1. The Libyan Investment Authority pays USD 200 million.
2. Goldman Sachs Bank is to be used in designing an investment portfolio to acquire stocks in Citigroup by attaining leverage at and equivalent of USD 607,902,736 for three years.
3. Dividends distributed on Citigroup stocks are to be paid to Goldman Sachs in advance to offset part of the cost of borrowing (LIBOR 3.34%), considering a settlement to be made after three years.
4. Loan surety is to be paid through purchasing a put option from Goldman Sachs.
5. The lowest price possible per share during the next nine months will be secured through purchasing a financial derivative called “Look Back Option” at a 90% barrier.
This strategy will enable the Libyan Investment Authority to acquire the equivalent of 0.5% of Citigroup.”
At a high level, that accurately describes the economics, but it’s sort of a goofy way of putting it. It also seems to describe the trade — as far as I can tell — as a purchase of the underlying stock, with a loan from Goldman, and the purchase of a put option to protect the downside. That is more or less economically equivalent to buying a call — if you draw the payout profiles you’ll get the same results — but it is not quite the same trade. For instance, if you borrow money to buy the stock, you have the actual stock.
These numbers tie to the presentation but not, apparently, to the actual trade, which was on “about 22 million shares” — presumably because it was executed after Citi had rebounded a bit from that $24.45 price. But my math is the $607.9 million notional divided by the $24.45 price used in the presentation, which makes the numbers described in that quote make sense.
There’s a delightful excerpt from a January 2008 presentation by an LIA official to its board:
“We consulted with a number of financial analysts specializing in equity markets, who confirmed that the current decline in shares witnessed by markets was not founded on factual bases, and that it was only temporary and caused by illogical panic that adversely affected the value of shares. They further noted that the value of shares will increase again due to the new economic conditions in USA, remaining industrial states, and developing states, which are not expected to suffer recession in the foreseeable future.”
Oh, random fun sentence about him:
He has also been described by his former colleague as being more concerned about his remuneration package and his annual bonus than most other bankers.
That’s saying something!
The judge summarizes the contention: “They allege that Goldman Sachs crossed the boundary of the usual counterparty relationship between a bank and its client and became in effect the LIA’s adviser or ‘man of affairs’ to adopt a rather outmoded expression used in the case law.”
“Man of affairs” would be a fun title, if it didn’t come with extra legal duties.
Besides the entertainment expenses, Goldman also gave the brother of Mustafa Zarti (the LIA deputy chairman) an internship. The judge does not think that this created any undue influence, but it is potentially awkward for Goldman as a matter of, say, U.S. law.
The judge also writes:
Many banks and financial institutions were eager to do business with the LIA and many succeeded in obtaining business worth millions of dollars. The fact that Goldman Sachs were prepared to go an extra mile when competing for this business by installing Mr Kabbaj in Tripoli to help the LIA does not mean that they were in a different relationship from the relationship that existed between the LIA and its other counterparties, even when looked at together with the other factors. The Goldman Sachs internal commentary on the relationship is striking. But it must be seen against a background where they could see a hugely lucrative and long term line of business available from the LIA and realised that they needed to fight their way to the front of the queue of other institutions lining up to provide the LIA with services. One must also bear in mind that the customer-facing Goldman Sachs personnel knew that their individual remuneration might be influenced not only by the value of business achieved but by the bank’s perception of their individual role in winning that business for Goldman Sachs. Having considered all these factors, I am not satisfied that the relationship that developed between the two parties crossed the line from being a strong, cordial business relationship between a buyer and a seller of financial services to being the kind of relationship of trust and confidence giving rise to a duty of candour and fairness on the part of the bank to its client.
There’s a sad paragraph about the junior team’s deep and various misunderstandings:
I accept as truthful their evidence that they remained under a misapprehension until Ms McDougall arrived that the Disputed Trades somehow would result in the LIA acquiring some shares in the underlying companies. They did not all believe the same thing about the nature of the trades and their thoughts about how the trades would play out were confused. They seemed to differ as to whether shares would be acquired at the start of the trade or only on the maturity date; how many shares would be bought (was it an amount represented by the premium or the total notional amount or some other number); how would the purchase of the shares be paid for (given that they knew that the premium was expected to cover the cost of the put option and the risk that Goldman Sachs undertook that the share price might rise). They were also very unclear about how the vast amount of money borrowed by the LIA from Goldman Sachs to finance the trades would be repaid if the share price dropped. I am satisfied that this inconsistency in the evidence of the LIA witnesses was not the result of their fabricating this evidence consciously or unconsciously but genuinely reflected their confused state of thinking at the time. I find that at least some members of the Equity Team had in their minds throughout the relevant period the idea that some shares would be acquired under the trades though by what mechanism was unclear.
“The evidence from Mr Vella and supported by the contemporaneous documents was that Goldman Sachs would not have taken on the credit risk of lending money to the LIA even with the shares posted as collateral for the loan because of the problems it would anticipate in enforcing such a loan against a sovereign entity in Libya.”
The LIA eventually did that, for this litigation, but that is much too late!
The judge sort of concludes that there was an “overall mark up of 2.5% across the Disputed Trades,” but that is the markup taken by the sales team; the trading desk had probably already built some profit into the walk-away price it showed to sales. (Probably; I am to some extent guessing here.) Overall the trades seem juicy but not crazy. If the LIA had shopped the trades around and tried to generate some competition, it could probably have paid quite a bit less for them. But it still would have lost everything it paid!
(BBG) When Wall Street’s most aggressive bank took on the world’s most incendiary client, someone was going to make a killing.
Moammar Qaddafi’s Libya was a miserable place for a business trip.
In 2008, a few years after renouncing its nuclear and chemical weapons program, the desert nation remained a menacing and ugly place, with cratered highways, awful restaurants with no booze, and Qaddafi’s leathery visage everywhere, staring balefully down from billboards. The dreary capital, Tripoli, sat at the edge of the Sahara, in the least barren sliver of a country defined in the West by dictatorship, terrorism, and billions of dollars’ worth of oil.
Goldman Sachs’s Youssef Kabbaj was one of the few that enjoyed the commute. A securities salesman based out of the bank’s London headquarters, Kabbaj found that Libya reminded him of his native Morocco, and he considered the ruins in Tripoli’s old quarter enchanting. The city had a single decent hotel, the Corinthia, a crescent hulk the color of sand, and that year Kabbaj was such a frequent guest that he stored a rack of pressed suits there at all times. With slick black hair, round cheeks, and a mischievous smile, he was fluent in English, French, Arabic, and the language of international finance.
Qaddafi’s peaceful turn had reopened Libya to Western banking for the first time in two decades. Its $60 billion in oil wealth, no longer dammed up by international sanctions, was ready to flood into the market, as directed by the Libyan Investment Authority, Qaddafi’s brand-new sovereign wealth fund. With his North African pedigree, Kabbaj had been one of the first at Goldman to spot the opportunity. The LIA had become his biggest client, transforming him in a year from rookie salesman into possibly the No. 1 rainmaker at the world’s most profitable investment bank. He was 31 years old.
On July 23, 2008, Kabbaj was in his room at the Corinthia, waiting anxiously for his mobile phone to ring. It finally did around 9 a.m., and he grabbed a pen and paper to take notes. On the line was Michael Daffey, a senior Goldman executive in London. Daffey praised Kabbaj’s work in Libya and said that after some negotiation, the bank was willing to guarantee him $9 million in pay. It was an astonishing sum, even at Goldman.
Kabbaj immediately asked for more. He knew he’d been instrumental in extracting an unusual amount of money from a highly unusual client. Who else on the planet could sell a billion dollars of derivatives to a regime whose theatrical despot slept in a tent under an all-female warrior guard?
By now Kabbaj was running late, and Nick Pentreath, a South African colleague on one of his first trips to Libya, was knocking on his hotel room door to hurry him up. They’d been summoned to a late-morning meeting by the LIA’s deputy chief executive, Mustafa Zarti, a Qaddafi family friend. Zarti kept a ceremonial sword mounted above his desk—and was rumored to wave it around before visitors who displeased him. The markets were scary enough that summer. Bear Stearns, an American investment bank, had collapsed in March, and there were rumors that Lehman Brothers could be next. Zarti wanted Kabbaj to give him an update on Libya’s portfolio at Goldman.
Pentreath and Kabbaj took a short taxi ride to the Al-Fateh Tower, a two-pronged structure of stupendous ugliness that loomed over Tripoli in a style that might be called totalitarian postmodern. The LIA’s offices were on the 22nd floor. Usually, Kabbaj was shown right in, but this time he and Pentreath were kept waiting for what felt like hours, watched over by an oversize portrait of Qaddafi in military garb. Something wasn’t quite right. Finally, as Kabbaj was called into a boardroom next to Zarti’s office, he recognized three bankers from the French bank Société Générale—Goldman’s main rival for the LIA’s cash. He saw with alarm that they were holding term sheets for Goldman deals and grinning at him as he walked past.
Kabbaj steeled himself and began to address Zarti. The LIA’s day-to-day chief was 38, with plump features, thinning black hair, and a Marlboro Red forever at his lips. He glowered as Kabbaj said that Goldman had some great new trading ideas. Zarti cut him off, saying he wanted to talk about deals that had already been done. Kabbaj started drawing on a whiteboard, running through basic concepts like how options could be “in the money” or “out of the money,” and Pentreath began a technical explanation of the derivatives.
Zarti again interrupted. “Youssef,” he said, “I’m asking you.” Before Kabbaj could say much more, Zarti exploded. Screaming in a mix of English and Arabic, he accused Kabbaj of deceiving the LIA into deals it didn’t understand. He called Goldman “a bank of Mafiosi” and said that he could behave like a Mafioso, too. He stormed out of the room, leaving Kabbaj, Pentreath, and a clutch of LIA staffers in a Marlboro haze.
Shaken, Kabbaj asked Zarti’s aides what had just happened. None had an answer. After a few minutes, Zarti burst back in, angrier than ever. Catherine McDougall, an Australian lawyer who was in the office that day, later recalled Zarti’s words as along the lines of “F— your mother, f— you, and get out of my country.” Kabbaj and Pentreath packed up their things.
Zarti followed them into the corridor. If Kabbaj didn’t make amends, he shouted, “we will go after your own family in Morocco!” The Al-Fateh Tower elevators were agonizingly slow to arrive. “What are you still doing here? Get out of my building!” Zarti screamed. He told Pentreath that if he didn’t get in the lift soon, he’d throw him out the window.
Kabbaj was white with shock. Zarti had saved his most chilling remark for him. “You are only a Moroccan here in Libya,” he said. “I can make you disappear, and nobody will ever hear back from you.”
The story of Goldman’s seduction of Libya—based on court evidence, testimony from witnesses, and interviews with people who were involved in the transactions—is as brief as it was costly. Barely 12 months elapsed between Zarti’s first tour of the bank and his threat to murder its brightest young star, and Libya wound up losing $1.2 billion. Goldman enjoyed its payday, the exact size of which it has never disclosed. But whatever the level, the matter is now before a London judge, and the Libyans have a chance to extract an even more damaging toll.
For 65 million years, a mile beneath what’s now the Libyan Desert, the supercompressed remains of billions of dinosaurs, plants, and other Cretaceous organisms have been gently cooking into crude. Human ancestors were using tools in the region 200,000 years ago, and early civilizations came to be conquered in turn by the Phoenicians, the Greeks, the Romans, and others in a chain of foreign rule that reached the modern era. Italy relinquished Libya after World War II, and the nation declared independence in 1951. Eight years later, Western drillers struck what remain the largest oil reserves in all of Africa.
In 1969, while Libya’s U.S.-allied king was out of the country, a strikingly handsome young military officer pulled off an ambitious coup. Initially, Moammar Qaddafi ruled as a garden-variety Arab nationalist, like those who’d recently taken over Egypt, Iraq, and Syria. He gradually became more erratic, writing checks to the Black Panthers and Red Brigades and declaring himself supreme leader of the Great Socialist People’s Libyan Arab Jamahiriya. By the 1980s, Qaddafi seemed to relish his image as a villain out of a Chuck Norris movie, blamed for a Berlin nightclub bombing, targeting U.S. servicemen in the region, and downing a Pan Am jet over Scotland, killing 270 people. Ronald Reagan called him the “mad dog of the Middle East,” an image that stuck even as Qaddafi extended his canny rule into the 21st century.
U.S.-led sanctions steadily crippled the Libyan economy. Then, in 2003, Qaddafi watched American troops invade Iraq and drag a filthy Saddam Hussein out of a spider hole. A few days later, Qaddafi offered to give up Libya’s WMD programs. Eager to reward good behavior, the U.S. eased sanctions, restoring full relations in 2006. Qaddafi might have been a brutal tyrant who forced citizens to study his Green Book, but he was abruptly a man the West could do business with. So complete was the reversal in his fortunes that on one visit to New York he struck a deal to pitch his Bedouin tent on the Westchester County lawn of Donald Trump.
McDougall asked to see due diligence. The LIA responded, “Due what?”
The reemergence of Libya, and its vast oil wealth, coincided with an era of nearly unbridled avarice on Wall Street—and nowhere more so than at Goldman Sachs. The same year that Qaddafi established the LIA, Goldman posted the largest profit in Wall Street history. The bank paid employees an average of $622,000, with many times that amount available for bankers who nailed down the biggest deals. A stupendously wealthy petro state desperate to buy into a bull market was a dream client—the kind of “elephant,” in Goldman argot, that could make careers.
Kabbaj joined Goldman’s London office in 2006. Born to a wealthy Rabat family, he’d attended the elite Lycée Louis-le-Grand in Paris, going on to a degree in engineering at MIT. Goldman hired him after a stint at a Moroccan bank, initially offering Kabbaj a job as one of its “quants”—the math whizzes who devise algorithmic trading strategies behind closed doors. He insisted on a role in sales, convinced he could climb the ladder faster by being close to clients. The only available post was on a team covering Africa—at the time, a backwater within the firm that generated next to no revenue.
Kabbaj was one of the first to realize that to make big money in Africa, Goldman would have to tap Libya, telling a colleague in February 2007 that its wealth fund was “one of our key prospects.” He cold-called the LIA and was told that Zarti was due in London soon and would listen to what Kabbaj and his colleagues had to say.
Zarti’s background underscored the essential weirdness of doing business in Libya, where there were few private companies and credit cards didn’t exist until 2005. Before coming to the LIA, he’d worked at a fund run by OPEC and led a modest tuna-fishing concern. He also happened to be a close friend of Saif Qaddafi, Moammar’s son, which in Libya was the best possible qualification for a government job. Zarti favored Italian suits in loud colors, paired with chunky watches from Audemars Piguet, and he was often accompanied at meetings by his elegant assistant Sofia Wellesley, the aristocratic granddaughter of the Duke of Wellington, who would make introductions and smooth out Zarti’s rough manners. (Zarti declined interview requests sent through a spokesman.)
Zarti and Wellesley were given the VIP treatment when they arrived at Goldman’s Fleet Street offices on the afternoon of July 6, 2007, waved past security and escorted onto the trading floor by Kabbaj. The Libyan seemed awed by the cavernous space, clanging with the noise of late-day trading. Zarti kept asking if he could smoke and kept getting told he couldn’t. After the tour, he was led into a glass-walled office to meet Goldman partner Driss Ben-Brahim. Tall and charismatic, with dual Austrian and Moroccan citizenship, Ben-Brahim was well-known in the Arab world thanks to reports that he’d been paid a £30 million ($54 million) bonus in 2004. (Goldman denied the story at the time.) Ben-Brahim gave Zarti a sense of Goldman’s scale: It had 26,000 employees, $69 billion in revenue, and $9.5 billion in profit. Zarti said, “So if you had a flag, you’d be a country.” Pleased, he invited Goldman to come to Libya to talk about whether the LIA should make some small “appetizer” investments—something in the region of $100 million to $200 million.
Soon after, a group of Goldman bankers converged on Tripoli, including Ben-Brahim; Kabbaj and another salesman, Laurent Lalou; and Edward Eisler, a senior trader. On the ground, Libyan officials confiscated a bottle of wine intended as a gift. Alcohol was banned in Qaddafi’s Libya, and speed limits didn’t really exist, as the bankers learned on a white-knuckle ride into town, their local drivers tearing down the decrepit roads at more than 90 miles an hour. The Goldman delegation stayed at the Corinthia, which, because of its monopoly on business travel, charged upwards of $500 for a basic room. Ben-Brahim said, half-seriously, that Goldman should buy it.
First impressions of the LIA were unpromising. The Al-Fateh Tower seemed like it couldn’t possibly be the headquarters of a multibillion-dollar investment fund. The 25-story structure had been built without enough elevators, which meant long waits in a dingy lobby full of cell phone shops. A ring-shaped roof deck was supposed to rotate but didn’t. The LIA’s floor was a raw construction site with almost no furniture. But such concerns receded when LIA’s chief executive officer, Mohammed Layas, an experienced banker, explained the fund’s ambitions. Qaddafi himself, who communicated with the LIA through missives transcribed by a man known as “Qaddafi’s quill,” wanted large, quick returns to support state spending.
“Investment opportunities with this account is [sic] one of the largest I’ve ever seen,” Goldman partner Yusuf Aliredha wrote afterward. “We are all over them.” Goldman wanted to strike quickly, as other firms began to notice the giant pot of money in Libya. The day Goldman arrived, Wellesley noted in an e-mail that “there are private jets blocking Tripoli International.”
Ben-Brahim was on vacation in the south of France later in July when Zarti got in touch, asking him to meet on a yacht that had just pulled into Cannes from Saint-Tropez. As Ben-Brahim climbed aboard the vessel, he realized that it belonged to Saif Qaddafi, the colonel’s heir apparent, who had an international reputation as Libya’s reformer-in-chief. After the three men spoke, Ben-Brahim thought there could be even more money in Libya than Goldman realized. The country expected “gigantic” new oil and gas finds, he wrote in a debrief to colleagues, who began to gossip about the bank’s exotic new client—including tales, never confirmed, that the yacht meeting featured a cameo by one of Saif’s pet white tigers.
Ben-Brahim instructed Kabbaj to “stay a lot in Tripoli. It’s important you stay super close to the client on a daily basis. Teach them, train them, dine them.” Aliredha agreed. “You need to own this client,” he wrote. “This is a once in a career opportunity.” Kabbaj traveled to Tripoli four more times before the end of September, becoming such a fixture at the Al-Fateh Tower that he eventually got his own desk. He spent part of his time taking the LIA’s junior people “through Finance 1.00,” as he put it, using MIT’s term for an introductory course. The fund’s young staff had been recruited from the Libyan diaspora with help from Monitor, the Massachusetts-based consulting firm, and knew little about complex securities deals. Kabbaj helped stock an in-house library. In addition to dry tomes on asset allocation and pop-economics hits such as The Black Swan, he bought the Libyans a few copies of Liar’s Poker, Michael Lewis’s seminal tale of bond salesmen screwing over clients. (Amazon.com didn’t deliver to Libya, so Kabbaj ordered the books to London and had a colleague lug them to Tripoli.)
Kabbaj also entertained the Libyans when they came to London, expensing a $757 sushi dinner at Nobu and taking them to the Lord of the Rings musical. Lalou took a junior LIA employee to Paris to watch England’s rugby team play South Africa. (Goldman says the hospitality was in line with what other banks also provided the fund.) Nothing was too much trouble. One banker, Jaber Jabbour, declared to an LIA employee by e-mail, “You are brothers and friends before clients.”
By late September 2007, the LIA was ready to proceed with its first substantial investment with Goldman: $350 million into two funds called Petershill and Mezzanine. Libya had signed a document describing itself as a “market counterparty”—large and sophisticated enough not to need special regulatory protection. Ben-Brahim and Aliredha flew again to Tripoli early in October, chartering a jet from Qaddafi’s favorite vendor to give their arrival the necessary gravitas.
It was Ramadan, and the Goldman team joined LIA executives for a traditional breaking-the-fast dinner at the Corinthia. Layas, the LIA chief executive, was at the head of the table. The LIA had previously indicated that it was planning to split its business equally among as many as 20 banks, but as they ate, Goldman’s executives suggested a more exclusive relationship. They proposed a dedicated team of partners, access to research and training, and the opportunity to join in Goldman’s own proprietary investments—a “strategic partnership.” Both sides could make money, Ben-Brahim told the group, citing Goldman’s long-standing informal motto of being “long-term greedy.” The Libyans were receptive. Ben-Brahim and Aliredha flew straight back to London after the meal, leaving Jabbour and Kabbaj behind to discuss Goldman’s proposals. They were bleary-eyed, having just pulled an all-nighter preparing a presentation. A suggested first step: “Buy strategic stakes in key undervalued companies.”
By January 2008, the Libyans had some companies in mind. The talk at the LIA, Kabbaj learned, was that Qaddafi wanted to emulate the leaders of Qatar, who’d invested in the shares of troubled banks. One target was Citigroup, which Abu Dhabi’s sovereign wealth fund had put $7.5 billion into less than two months before. On Jan. 15, Kabbaj texted the head of the LIA’s equities team to note that Citi shares were down, creating a buying opportunity: “It is time to do the trade!!!”
The Libyans made two trades later that month, totaling $200 million. But this wasn’t a simple purchase of shares—it was a complex derivatives deal, or as Goldman Sachs described it later, “a cash-settled forward purchase agreement for Citigroup shares with downside protection in the form of a put option at the same price as the forward.” More simply, if Citi shares rose, as the LIA was betting, the fund stood to gain many times its initial investment. If the shares fell by a certain amount, the fund could lose everything. The structure was potentially more lucrative than a conventional purchase of equity and also significantly riskier—while resulting in far higher profits for Goldman.
Whether the LIA understood it wasn’t actually investing in Citi is disputed. Whatever the case, the fund proceeded a few weeks later with another large deal, a similar wager on the French utility EDF Group that cost it almost €120 million (then $175 million) in premiums.
Word was getting around the financial sphere that Goldman had landed an African elephant. Kabbaj discovered that Société Générale was also pursuing megadeals with the LIA. “People are spreading that we made a lot of money with LIA and we screwed them,” Kabbaj texted a colleague from Tripoli. “Even though this is of course uncorrect [sic], Pnls [profit and loss figures] have to become super secret.”
Kabbaj began spending more time with the Libyans and bought some of them iPods. A few came to London in February for training at Goldman, with the firm covering their hotels and dinners. There, Kabbaj could entertain the Libyans in a capital with incomparably greater diversions than Tripoli. At Zuma, a bankers-and-Bentleys Japanese restaurant in Knightsbridge, he expensed a $1,009 dinner; at The Playroom lounge, he put $1,573 on his corporate card. They went to see Chicago and, records indicate, the Lord of the Rings musical again.
To help plan the training sessions, one of Kabbaj’s colleagues e-mailed to ask about the level of the Libyans’ knowledge of derivatives. He responded: “Baaaaaaaasic.” In another exchange, Kabbaj’s manager, Lalou, told a colleague he’d “just delivered a pitch on structured leveraged loans to someone who lives in the middle of the desert with his camels.”
Zarti had goals beyond the greater glory of Libya. He also wanted to help his younger brother, Haitem, learn the banking trade, preferably through an internship at Goldman. Kabbaj wouldn’t disappoint his best client.
Kabbaj found it easy to connect with Haitem, who was 25, shy, and soft-spoken—nothing like his intense sibling. Both he and Kabbaj were single and from important North African families. They spent the weekend together in Morocco in late February and then flew business class to Dubai, where Kabbaj had offered to take Haitem to a Goldman conference, checking into the five-star Ritz-Carlton, all at the firm’s expense.
Just after arriving, Kabbaj used his company BlackBerry to get in touch with a prostitute who went by the name Michella. “Hi darling, do you remember me? Youssef from London,” he texted. “Just arrived in dubai. Available tonight, with a friend?” They haggled over price before Kabbaj agreed to pay $300, with one condition: “Your friend has to be as good looking as you.” There is no record of what happened next, but the following day, Kabbaj texted Haitem to say he needed a rest: “Going to the hotel. I am dead.” A couple of nights later, Kabbaj wrote that he’d stay in, “Getting back to god’s way incha allah.”
Immediately after returning from Dubai, Haitem sent Kabbaj his résumé, which didn’t fit the bank’s typical hiring profile. Haitem listed an MBA from the Vienna campus of Webster University, an institution based in St. Louis with branches mostly near U.S. military bases, and his most recent work experience was at a “Video Club” in 2003, where he was “in charge of customer and reservation services.”
Ben-Brahim, discussing the possibility of an internship by e-mail with two other partners, said he was “not sure what the best course of action is. We are running the risk of ‘upsetting’ [Mustafa] Zarti.” Yet by April, Goldman was prepared to offer a 6- to 12-week gig to Haitem. The next day, Kabbaj told colleagues he’d spoken with Mustafa about further deals, and that the elder Zarti wanted “to give us something. If we can have him focus, we should be in a good position.”
The same month, Kabbaj again spent a weekend with Haitem in Marrakech and flew him to Dubai a second time. Haitem dawdled in committing to the internship. Kabbaj messaged him a few days later, on April 23: “Can you start May 1? June 1? Mustafa wants you to start asap.” Haitem indicated June. “OK. How long? Mustafa is killing us,” Kabbaj replied. The same day, the elder Zarti gave the go-ahead for Goldman to execute several trades of astonishing size, totaling more than €2.4 billion in notional value. Like the Citi and EDF deals, they were “synthetic”—the LIA wasn’t actually buying shares in the companies concerned, in this case Banco Santander, Allianz, Eni, and UniCredit. Kabbaj later called it “one of the biggest orders that GS has ever been given on single names.” (Goldman says Haitem’s internship had no impact on the trades. Haitem couldn’t be reached for comment.)
The scale of Goldman’s business with Libya was now being noticed at the highest levels. When Chief Executive Officer Lloyd Blankfein “found out how big the p&l [was] on the recent trade he started asking” questions about it, one executive said in an April e-mail. Another internal note later described Kabbaj as perhaps Goldman’s top salesman globally. In a text to Kabbaj, Ben-Brahim’s verdict was simple: “Bravo Youssef. Well done. You are a hero.”
Goldman’s downfall in Libya began with the arrival of Catherine McDougall. A cheerful Australian lawyer at London firm Allen & Overy, she was just 26 when she arrived in Tripoli on July 1, 2008, to begin an assignment with the LIA, which was seen as a major potential client. Although McDougall had traveled widely in the Middle East, Libya was a new experience. It seemed frozen in the 1970s: There were no cinemas and barely any shops. Foreigners lived in gated compounds under the watchful eyes of Qaddafi’s secret police, who LIA employees warned her had moles at the office. In London she’d bought a copy of In the Country of Men, a novel depicting the fearful atmosphere of 1970s Tripoli. When her Libyan counterparts saw it on her desk, they told her to put it away. Qaddafi had banned the book.
McDougall was astonished by how little the LIA’s junior employees seemed to know. The legal department’s level of competence in dealing with complex legal documentation was “zero,” she wrote later in a witness statement. The problem was compounded by rudimentary English and basic paperwork that was missing. She described the setup as like “an advertising company having no TVs.”
One of McDougall’s tasks was to work with LIA staff on some paperwork for the Goldman derivatives trades. She was struck by their affection for Kabbaj, whom they considered a friend. One LIA staff member showed McDougall Facebook photos of Kabbaj hanging out with the equity team. They told her stories of expensive nights out in London and Morocco, covered by his Goldman credit card. As she learned more, McDougall began to suspect the LIA team didn’t realize they hadn’t purchased actual shares. No one understood, she wrote, that if the underlying stocks went the wrong way, “they could lose all their money.” She asked to see the due diligence the LIA had performed before committing to the deals. They responded, she wrote, “Due what?”
“We have always disputed the LIA’s claim that it was financially illiterate and it is clear that they understood the disputed trades and entered into them of their own volition”
Citigroup’s share price, meanwhile, had dropped about 40 percent since the start of the year, and analysts were warning of a worldwide credit crisis. McDougall relayed her concerns to Zarti, who also asked her opinion on a currency trade the fund had recently carried out with Goldman. She told him the $50 million the LIA had committed to the deal stood a better chance if she took it to a Monaco casino. Zarti asked Kabbaj to return to Tripoli. Soon, on July 23, 2008, Goldman’s phenom was sitting on the 22nd floor of the Al-Fateh Tower, thinking about his $9 million paycheck and wondering why Zarti was keeping him waiting so long.
After Zarti offered to defenestrate Pentreath and disappear Kabbaj, the two bankers hustled into a cab back to the Corinthia. They understood that in Libya, threats that came from a close friend of the Qaddafis weren’t to be taken lightly. From his hotel room, Kabbaj called Michael Sherwood, one of Goldman’s top London executives, who said the bank would do whatever it took to get them out. Goldman’s security team called back, telling Kabbaj it was looking at options for “extraction” and ordering him not to leave the Corinthia. The hotel housed the U.S. embassy and a complement of armed U.S. Marines, not to mention hundreds of foreign witnesses to anything unpleasant that might occur. The next morning, a Goldman partner called to say the bank’s security team was increasingly concerned about their safety. They hustled to the airport and a flight to London.
Seven weeks later: the end of the world. Lehman Brothers filed for bankruptcy in September, and stocks crashed. The full force of the global financial crisis left Libya’s derivative bets virtually worthless; when they expired three years later, the LIA had lost $1.2 billion—a total wipeout. Goldman hasn’t revealed how much profit it made from the other side of the trades, saying only that the figure was appropriate given the size and risk of the deals. The LIA has said it was more than $200 million.
Kabbaj never got his $9 million. After the confrontation in Tripoli, he was told he’d be fired if he tried to contact the LIA. Sidelined to minor accounts, he took to joking that he’d been put in charge of “Oman and North Korea.” When Kabbaj complained, Andrea Vella—a Goldman partner who took charge of the Libya relationship—got so angry he took off his shoe and used it to pound the table, according to Kabbaj’s lawyers. (Vella says he doesn’t recall the incident.) In November 2008, Kabbaj threatened to sue Goldman for the pay he’d been promised, claiming to fear for his life and blaming Libya for ruining his reputation. Goldman agreed to pay Kabbaj $4.5 million, according to court filings, under two conditions: that he leave the bank and that he keep quiet about the circumstances of his exit. Incredibly, Haitem Zarti outlasted Kabbaj at Goldman. The bank extended his internship six times, to 11 months. (The LIA has said U.S. authorities are investigating the internship. Goldman declined to comment.) Now working at a small financial firm in Dubai, Kabbaj said in a June statement that neither he nor Goldman paid for improper entertainment for LIA employees. “All my expenses relating to LIA have been reimbursed and signed off by at least two Goldman Sachs partners,” he said. “I am under a strong confidentiality agreement but I expect Goldman Sachs to correct the facts and protect my reputation.”
Qaddafi came to a grisly end. In early 2011, when Arab Spring protests spread from neighboring Tunisia into Libya, he turned on his own people with shocking savagery. As his forces bombed and shot demonstrators, the U.S. and its allies reimposed sanctions and began military action. Assisted by Western airstrikes, rebels captured Tripoli in August, and that October, Qaddafi was dragged from a drainpipe, shot, and killed. Zarti fled to Vienna.
Libya’s new leaders started asking questions about the LIA’s dealings. Global Witness, an investigative organization funded by billionaire George Soros, published leaked documents in 2011 that showed the dismal performance of the LIA’s investments at the end of the Qaddafi era. It had made deals with at least 70 different banks and investment firms, many of them losing money. In 2013, AbdulMagid Breish, the new LIA chairman, asked Deloitte to review the fund’s losses, and a U.K. firm, Enyo Law, to look at whether they could recover anything through the courts. The LIA sued Goldman for $1.2 billion in London on Jan. 21, 2014, just before a six-year statute of limitations would have expired. (It later filed a separate suit against Société Générale, which denies wrongdoing.)
The LIA v. Goldman Sachs trial began in June 2016 in a bright, modern courthouse just a few hundred yards from the bank’s Fleet Street offices. The chaos of post-Qaddafi Libya, which has two rival governments plus an insurgency by Islamic State militants, had its echoes in the courtroom. At the outset of the case, the LIA also had dueling executive teams—one based in Malta and one in Tripoli—and both factions hired their own legal and PR outfits. For now, a court-appointed accounting firm is managing the case on Libya’s behalf.
During the trial, the LIA claimed its people never understood they weren’t buying shares. They barely understood anything at all, their lawyers argued, and were the victims of Goldman’s gifts, slick salesmanship, and misleading marketing materials. Several junior LIA staffers came to London to testify about the extent of their naiveté. One said he’d never heard of Goldman Sachs, or derivatives, before getting a job at the fund.
Goldman argued the LIA was exaggerating its cluelessness. Even if its staff didn’t understand the deals, lawyer Robert Miles said, that’s not the bank’s problem; the Libyans entered commercial transactions, fair and square. The LIA “understood at all times that Mr. Kabbaj was a salesman, and that his job was to sell investments to the LIA from which [Goldman] could make money,” Goldman’s lawyers said in closing arguments. The bank’s official statement on the lawsuit reads, in part, “We have always disputed the LIA’s claim that it was financially illiterate and it is clear that they understood the disputed trades and entered into them of their own volition.”
The judge in the case will rule after early October. Why is Goldman allowing such an embarrassing suit to drag on, exposing its internal talk of prostitutes and camels, instead of quietly settling? More than the bank’s image is at stake. The LIA is employing a legal concept called “undue influence” that’s more commonly used by wives against husbands—it’s novel in financial litigation. The idea is that one party to a transaction can have so much power over another that a contract between them isn’t valid. If Libya wins, investment banks everywhere will face the risk of lawsuits by clients claiming they were snowed.
Goldman may have made hundreds of millions off Libya, but it’s put banking dogma at risk. A bedrock principle of the securities business is that sophisticated investors can look out for themselves and don’t have recourse to the courts if they lose their shirts. If a huge sovereign wealth fund can successfully claim it was duped, there’s no telling who else can. Ben-Brahim identified the perils of dealing with Libya in an April 2008 e-mail. “These guys are extreme,” he wrote a colleague. “If we truly behave as steadfast friends looking after their interests, they will do anything for us. If we ever lose their trust, they are ruthless.”
(EurActiv) Britain’s 2011 military intervention in Libya, ordered by former prime minister David Cameron, relied on flawed intelligence and hastened the North African country’s political and economic collapse, lawmakers said today (14 September) in a damning report.
Britain and France led international efforts to help oust Libya’s then-leader Muammar Gaddafi in early 2011, using fighter jets to beat back Gaddafi’s armies and allow rebels to topple the longtime dictator.
But Libya has since suffered years of chaos. The Islamic State has gained a foothold in the country, former rebels still fight over territory and people smugglers have set up a huge operation, sending tens of thousands on the perilous sea journey to Europe.
Cameron’s role “decisive”
Cameron, who ran Britain from 2010 until July, had a “decisive” role in the decision to intervene and must bear the responsibility for Britain’s role in the crisis in Libya, a report produced by parliament’s Foreign Affairs Committee said.
“The UK’s actions in Libya were part of an ill-conceived intervention, the results of which are still playing out today,” said Committee Chairman Crispin Blunt, a member of Cameron’s Conservative party.
“UK policy in Libya before and since the intervention of March 2011 was founded on erroneous assumptions and an incomplete understanding of the country and the situation.”
The committee’s statement said the “ultimate responsibility rests with David Cameron’s leadership”.
Earlier this year, US President Barack Obama said European allies had become distracted from the Libyan crisis after the intervention. Obama’s office later said he had not intended to be critical of Cameron.
Cameron stepped down as prime minister after losing a referendum to keep Britain in the European Union, and on Monday resigned as a member of parliament saying he did not want to become a distraction for his successor Theresa May.
The report said his government failed to identify from intelligence reports that the threat to civilians was overstated and that the rebels included a significant Islamist element.
The post-intervention response was also lacking, it said.
“Our lack of understanding of the institutional capacity of the country stymied Libya’s progress in establishing security on the ground and absorbing financial and other resources from the international community,” Blunt said.
Conflict, political infighting and Isis attacks have dented Libya’s oil industry. But there are hopes oil production will rise, after rival leaders agreed to unify the state oil group. Mustafa Sanalla, chairman of the National Oil Corporation of Libya talks to the FT’s Anjli Raval.
In the FT:”Fear that arms provided to the GNA could go to Isis militants”
Well, that’s exactly my fear also.
(FT) Transforming Libya’s warring militias into a national army that can take on Isis was never going to be easy but diplomats hope they have come a step closer this week by allowing arms to be sent to the fledgling Government of National Accord in Tripoli.
The GNA’s international backers are counting on its head, prime minister Fayez al-Sarraj, to unite the country warring factions to prevent the jihadis from further entrenching themselves on the coast around Sirte, which could give them a launch pad into Europe.
“We want to see them [the GNA] form a unified command structure that can reach out to all parts of Libya,” said a western diplomat. “It is important though judging by progress so far this it will not be easy.”
The partial lifting of the arms embargo is part of a broader international push to boost the new government. European foreign ministers have visited Mr Sarraj in Tripoli and the UN sanctions committee has helped block attempts by the unrecognised government in the east to export Libyan oil.
But the challenges facing the GNA are daunting. Currently its Tripoli-based members are struggling to gain recognition from powerful political factions controlling parts of the fragmented North African country. Remnants of the national army remain under the control of renegade former general Khalifa Haftar, who refuses to recognise the internationally backed body. And an array of militias hold territory and do not recognise any authority beyond their own leaders.
Mr Sarraj earlier this month announced the formation of a presidential guard drawn from police and army units from around the country to guard government installations and vital infrastructure. In the meantime, the GNA is forced to rely for protection on powerful militias from the capital and from Misurata, the city which emerged as a formidable fighting force in war to oust former dictator Muammer Gaddafi.
Analysts fear that weapons provided to the GNA could fall into the hands of Isis militants and lead to clashes between factions loyal to the GNA and Mr Haftar. Earlier this month there was a series of deadly skirmishes between Mr Haftar’s forces and militias from Misurata in Zilla, south of Sirte, where the general had said he had sent his soldiers to fight Isis.
Diplomats say that, despite the decision to arm the GNA, there is still considerable reluctance to allow substantial flows of weapons to enter the country. All requests for arms must be approved by the UN sanctions committee, said the western diplomat, who stressed that the Security Council will want to “look very carefully” into the end users.
“We obviously need to make sure that whatever is provided is provided in such a way that it can’t end up in the wrong hands, which is the purpose for the embargo to begin with,” said John Kirby, spokesman for the state department.
Mattia Toaldo, a Libya specialist at the European Council on Foreign Relations, said that arming the GNA could serve as a “carrot” to attract senior members of the Libyan national army who are at odds with Mr Haftar, a divisive figure. He points out that Mr Sarraj’s defence minister, Mahdi al-Barghati, is a military leader who has broken with Mr Haftar.
“The balancing act for the GNA is to work on having a unified army but without Haftar,” said Mr Toaldo. “The question will be how many people will Barghati bring with him to make it difficult for people in the east to say that the GNA represents only the west.”
Mr Haftar, who enjoys the support of both Egypt and the United Arab Emirates, insists that he is ridding the country from terrorists and from the Muslim Brotherhood group, parts of which back the GNA. Analysts say he has growing popular support in eastern Libya, particularly after his forces expelled Isis from parts of Benghazi, the biggest city in the east.
Claudia Gazzini, senior Libya analyst at the International Crisis Group, warns that while that giving arms to the GNA could help Mr Sarraj show Libyans that his government has international backing, it could also risk triggering the delivery of more weapons to Mr Haftar from international supporters, such as Egypt, Russia and the United Arab Emirates.
“The policy of offering weapons as a carrot to bring over important constituencies from the east has not worked in the past,” she said. “Mr Sarraj needs to first enlarge the footprint of consensus for his political project and to win over hostile constituencies in the east. If not then we may be heading to a collision between Haftar forces and pro-Sarraj forces which just opens the doors for Isis to benefit.”
(Times) Libya will “open the floodgates” and let thousands pour into Europe if the West does not help combat illegal immigration, officials have warned.
As Europe fears a bumper year for Mediterranean crossings, detention centres and coastguards say they are chronically underfunded and lack the basic tools they need to stem the flow.
Last year, 154,000 people crossed the Mediterranean from Libya to Italy, according to Frontex, the EU’s border agency. This year the number could more than double as migrants are redirected via war-torn Libya following the closure of the Balkans route.