Libya: What’s Really Behind the U.S. Action
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The Fiscal Times
March 30, 2011

Self interest is at the core of diplomacy. Therefore, the acknowledged lack of apparent U.S. self interest in containing Gaddafi’s troops in Libya has led some to question our military intervention in that country. Last night President Obama defended our engagement in Libya, suggesting that the United States is “different” from those countries that can stand by and witness atrocities; unlike others, Mr. Obama said, we have a moral mandate to protect innocent citizens. Naturally, we are led to wonder whether that same obligation extends to Syria or to Bahrain, or to any other country where a desperate government decides to slaughter its own people.

Is there something that President Obama is not telling us? Is it possible that we have a greater vested interest in squashing Gaddafi’s belligerence than we are letting on? Could it be that Gaddafi’s reported threats to bomb his country’s oilfields lit the fuse under the leaders of France and Britain who all but shamed us into climbing aboard? Or was it Gaddafi’s prediction that a flood of immigrants would “swamp” Europe that aroused Sarkozy’s energies? 

It is possible that the U.S. is more vulnerable to chaos in Libya than is generally known. Our economic recovery is hanging by a thread – a thread which weaves through the EU and also through Asia. Our modest recovery has been threatened repeatedly -- by the government debt crisis in Europe last year and more recently by the tsunami in Japan. Rising oil prices and the prospect of more wide-spread inflation appears to be taking a toll. The recent swoon in consumer confidence presages a fall-off in all-important spending while the housing numbers continue dismal.

Europe’s leaders might have convinced Obama that
Gaddafi’s threats to attack oilfields or create chaos
through disruptive immigration could sow the seeds of a
double dip in Europe.

As important as the consumer is in the U.S., it is also essential that our major export markets remain healthy. As in our country, the OECD members are challenged by fiscal difficulties and more recently by inflation. Consumer prices rose 2.4% in the OECD in February – the highest rate of increase since October 2008.    Concerns about price hikes are likely fueling anxiety among consumers in Europe as well as in the U.S.

All of these developments mean that the upturn from the banking crisis remains fragile. Fed Chair Ben Bernanke repeatedly has used this uncertainty to argue for the quantitative easing program (QE2) that many view as dangerously encouraging inflation. Bottom line: it is not a stretch to imagine that Europe’s leaders might have convinced President Obama that Gaddafi’s threats to attack oilfields or create chaos through disruptive immigration could sow the seeds of a double dip in Europe.

They could have made the case that a slump would have pulled the U.S. down as well – the worst of all possible preludes to the 2012 election for Mr. Obama. Were that case made, it is equally believable that Obama would engage all possible measures to thwart such a development.

In Europe, Italy is especially vulnerable to threats by Gaddafi to bomb his own oilfields and to unleash a massive wave of illegal immigrants. Because of its location, that country is already dealing with the exodus of large numbers of Tunisians and would be the natural entry point for Libyans as well. Italy, like other countries in the EU, is already struggling and in no position to support a wave of dependent newcomers. At the same time, Italy has sizeable economic interests in its former colony--its state-owned oil company is the largest in the North African nation.

Libya supplies 13% of Italy’s oil and 23% of its
natural gas. Gaddafi has warned that such interests
are at risk.

Italy is the single largest source of Libyan imports, accounting for nearly 19% of the country’s annual $24 billion outlays. Moreover, total imports into Libya have more than doubled in the past five years – a tempting market indeed. Libyan investors own sizeable shares of some of Italy’s leading companies such as banking giant UniCredit, Fiat and defense supplier Finmeccanica. Further, Libya supplies 13% of Italy’s oil and 23% of its natural gas. Gaddafi has warned that such interests are at risk.

Because of its economic entanglements with Libya, the leaders of Italy were initially reluctant to support the military intervention so eagerly pursued by England and France. In fact, at a time when others on the continent were criticizing the government in Tripoli, Prime Minister Silvio Berlusconi said he would not “bother” his close friend Gaddafi. Less than a year before, Berlusconi had hosted Gaddafi at a state dinner and ordered warplanes to draw a Libyan flag in the sky. More recently, the embattled leader revoked his country’s friendship agreement with Gaddafi.

After more than two decades on Wall Street as a top-ranked research analyst, Liz Peek became a columnist and political analyst. Aside from The Fiscal Times, she writes for, The New York Sun and Women on the Web.