Does the successful Libyan revolution mean anything for investors?

Posted on 22 August 2011 with 1 comment from readers

News that the civil war in Libya is virtually over today is a nice way to end the Holy Month of Ramadan this year. Revolutions are always a time of hope for the future, and great expectations that are very seldom realized.

For investors the most immediate impact is on the oil price which has fallen. That is a bit premature as it will clearly take ages to get Libyan production back up to pre-civil war levels as we saw with the invasion of Iraq, or for that matter the fall of the Shah of Iran.

Who rules Libya?

Who will be runing Libya now? The transitional council behind the rebel victory for the moment, and then democratic elections are promised. Will Libya’s tribal rivalries metamorphose into a modern multi-party state or will there be another battle for supremacy, and then another battle for supremacy?

Certainly whoever is running the show will put a priority on the oil sector to get some cash flowing into the country again. That will help to get commercial life going and where there is money business always follows.

Is there a link to far away Dubai? Well actually this is where the 70-member Libya Stabilisation Team is based and they have been planning for the end of the war for several months.

In time and with luck and good will Libya might be an economic miracle but who will take the risk and invest there now? It is by no means obvious and if the revolution fails to produce the goods for the people then the risk is always another revolution. That’s what happened years ago in Russia and France.

But then the risk is well known and Nato has offered far more than logistical support in this civil war. Europe does not want a chaotic, anarchic state on its doorstep and will be more than helpful to Libya now.

Perhaps more relevant to the Arab Spring as it becomes the Arab Autumn is that the focus of interest will shift from Libya to Syria now. This was already happening in any case but the ending of conflict in one country will move the eye of the media to the next focal point.

Syria different

Syria is more populous and better educated nation than Libya and it is closer to the heart of the Middle East. If it lapses into a full civil war, perhaps with the rebels winning Western support then a new chapter is opening for the region.

At the same time there is a civil war of sorts raging in Yemen. It is also a source of political instability that the region could do without. And Bahrain is still a powder keg that could flare up again at any moment.

So perhaps regional investors would be unwise to read too much into the rebel victory in Libya. There is still an awful lot of unsettled unrest and potential for violent uprisings in the region, and no sign of it being over yet aside from in Tripoli today, though that is a start at least.