Will a Stalemate in Libya lead to the Nationalization of Western Oil Companies?

The papers today were vey light on news from Libya so my guess is the polling numbers are not going Obama’s way. A week ago the rebels were marching west toward Tripoli. Gaddafi’s troops were in retreat and under attack from US fighter bombers. Cruise missiles were destroying Libyan air defenses. But the tide turned last Monday when Gaddafi’s forces repulsed the rebels at Sirte and retook the oil ports of Ras Lanuf and Brega. Note: Brega currently is being contested by rebels but is still considered in government hands.

NATO has since taken operational command of combat operations and the US has announced it has withdrawn its attack aircraft and will restrict itself to only tanker, jamming and reconnaissance mission. NATO has said it will not arm the rebels and the President and Defense Secretary have publicly ruled out the use of ground forces.

So where does that leave the coalition? Not in very good shape. We backed a ragtag undisciplined group of rebels with no fighting experience and expected them to defeat a trained military. We expected a no fly zone to halt Gaddafi’s troops then stopped flying support missions ourselves. Neither battles nor wars are won by timid actions and this will unfortunately prove it.

It will probably end up a stalemate, but with Gaddafi’s troops chipping away at the rebels in Benghazi. Likely they will simply drift away with Gaddafi and his family still in power. What the coalition never contemplated was the downside of not achieving victory.

Dictators, even benevolent ones, don’t take kindly to JDAMs landing in their sleeping quarters. It is likely Gaddafi is more than a little bit ticked at having his sleep disturbed followed by announcements from Washington, Paris and London that he must go. Will he retaliate? Of course he will. This is the Middle East.

The most vulnerable assets coalition countries have in Libya are its oil companies.  They include -- US: ConocoPhillips, Marathon, Hess, Occidental and ExxonMobil, UK: BP and Anglo Dutch Shell and France: government owned TOTAL. Oil likely will continue to flow, but not under the ownership of the western oil companies. Likely substitutes to operate nationalized facilities are Chinese and Russians operators who are ever willing to take advantage of western missteps.

Lesson for the future: There is no substitute for victory.