As the death toll rises and key government officials have resigned, unrest and protest against the rule of Muammar el-Qaddafi continue to rage through oil-rich Libya today. Qaddafi, who took power in 1969, built his rule around his eccentric personality and tribal alliances supported by Libya’s oil reserves. He’s ruled with an iron fist ever since, despite periods of erratic behavior. Qaddafi has offered concessions in the face of the protests, including doubling of state employees’ salaries, but at the same time has called for air strikes against the protesters.
On Sunday, demonstrations against the government spread to the capital city of Tripoli; there, protesters took over military bases and seized weapons. More than 200 people have died since the start of the unrest, including 60 in the eastern city of Benghazi.
President Obama has condemned the violence against the demonstrators in Libya.
Because of its anti-American position, foreign oil companies shunned Libya for many years. An exception has been Italian companies, including the oil company ENI. Italy has a historical link to Libya, as the country attempted a brief colonization of Libya in the early 20th century. Since then, Libya has been an important part of Italian foreign policy. In recent years, Italian companies such as ENI and UniCredit have come to depend on Libyan capital.
The unrest in Libya has been sending shockwaves through the Italian financial world, with shares in UniCredit and ENI plunging. While the companies have said that production is continuing normally with no impact on operations, it has also begun pulling out all “non-essential” staff and increasing security.
Libya’s neighbors, Tunisia and Egypt, have fallen in the past month, and protests are continuing in other countries, leading to worry that the unrest will move to other oil-rich countries and lead to higher gas prices. According to the New York Times:
“Oil prices rose 6 percent to $95 a barrel after the uprising threatened the country’s oil production. Libya is the world’s 18th largest oil producer, accounting for 2 percent of global daily output. It also sits atop the largest oil reserves in Africa.”
Investors have expressed concern that protests in the Middle East could have an effect on consumer optimism, slowing down the recovery.