February 01, 2008

Libya Sovereign Wealth Fund to Shun U.S., Ghanem Says

Libya Sovereign Wealth Fund to Shun U.S., Ghanem Says (Update2)

By Francine Lacqua and Maher Chmaytelli

Feb. 1 (Bloomberg) -- Libya's $100 billion sovereign wealth fund will avoid buying U.S. assets because of politically motivated restrictions on investments by Arab states, the North African nation's top oil official said.

The fund will consider buying stocks, bonds, real estate and banks in countries from China and Indonesia to Europe and Latin America, Shokri Ghanem, the chairman of Libya's state-owned National Oil Corp., said in Bloomberg Television interview yesterday evening in Vienna.

``The only market which is unfortunately not a pleasant market is the United States,'' he said. ``It's a very active market, but it is full of politics and unpleasant actions. In Europe, politics is not very much interfering in trade.''

Muammar al-Qaddafi, Libya's ruler since 1969, mended relations with the West by agreeing in 2003 to compensate the relatives of those killed in the 1988 bombing of a Pan Am flight that crashed in Lockerbie, Scotland. He also pledged to give up efforts to develop weapons of mass destruction, paving the way for greater investment by foreign companies.

Ghanem, who was Libya's prime minister from 2003 to 2006, said the government would be looking ``with attention'' to European banking and finance stocks that have depreciated. He didn't name any.

International Opportunities

Libya current prime minister, Basghdadi Mahmudi, said in a December interview that the country is preparing to invest more than $100 billion abroad, joining the United Arab Emirates and other oil-rich Arab states searching for international investments.

U.S. lawmakers, citing security concerns following the Sept. 11, 2001, attack on the World Trade Center, opposed DP World Ltd.'s ownership of six port terminals two years ago, forcing the Dubai- based company to sell them to American International Group Inc.

``Even the relations of the U.S. with traditional allies like Saudi Arabia haven't completely recovered from Sept. 11,'' said Diaa Rashwan, a specialist in Arab and Islamic affairs at Cairo's Al-Ahram Center for Political and Strategic Studies.

``Libyan-U.S. relations had been strained for three decades and they still have some way to go before we can see complete normalization,'' Rashwan said.

The North African nation's foreign minister, Abdel Rahman Shalgham, failed at a meeting last month in Washington with his U.S. counterpart Condoleezza Rice to obtain the full restoration of diplomatic ties between the two countries.

Libya, which has the largest oil reserves in Africa, has built up a sovereign wealth fund to benefit future generations once oil fields run dry.

Football, Nasdaq

The fund, managed by the Libyan Investment Authority, will add to a portfolio of stakes it holds in foreign companies including Italy's Banca di Roma SpA and Juventus Football Club SpA. The country is emulating the United Arab Emirates, Kuwait and Qatar, which have spent billions of dollars this year on foreign acquisitions, including stakes in Citigroup Inc., Nasdaq Stock Market Inc. and buyout firm Carlyle Group.

Libya is a member of the Organization of Petroleum Exporting Countries and exports $135 million of crude every day when prices are at $90 a barrel, according to state-run National Oil. It pumped 1.75 million barrels of oil a day last month, according to Bloomberg estimates, and most of that was exported.

Since 2001, oil-importing nations have transferred a combined $3 trillion more to OPEC than they otherwise would have paid had oil stayed near $20 a barrel, according to Goldman Sachs Group Inc. The price of crude oil tripled in four years to a record $100.09 a barrel on Jan. 3.

OPEC's net oil export revenue may exceed $850 billion in 2008, a 26 percent increase from last year, according to the U.S. Energy Department. OPEC decided today to maintain its current output targets.

To contact the reporters on this story: Francine Lacqua in Vienna at flacqua@bloomberg.net Maher Chmaytelli in Vienna at mchmaytelli@bloomberg.net

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