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After independence, the new Libyan state depended on foreign aid, because there was neither the money nor the personnel to run the complicated political system. Politically, it depended on the British and the Americans, who paid rent for the naval facilities at Tobruk and Wheelus military airfield (outside Tripoli), respectively.
Oil transformed an impoverished country. Multinational oil companies like Shell, BP, and Esso had begun preliminary work even before 1951 and oil was finally discovered in commercial quantities in 1955. The independent government had a quite different policy than the big producers in the Middle East. The Petroleum Law of 1955 rejected the pattern of single big concessions because the international oil market was already saturated. A single big company might not have made Libyan oil fields operational at all. Instead, it favoured smaller and competitive companies that would get production started.
The government divided concessions into much smaller areas and although many big multinationals, including the Italian ENI took part, so did smaller companies like Bunker Hunt and Occidental Petroleum.
The concession map of Libya clearly shows this pattern. It gave the royal government, and the Qaddafi regime after the coup of 1969, much greater control of oil resources. After a 167-kilometre pipeline was built to the Mediterranean Sea, oil exports began in 1961. That year they totalled $3 million and by 1969 they totalled $1,175 million, greatly encouraged by the closure of the Suez Canal in 1967 after the June War.
The monarchy was not prepared for the social changes brought by this increased income. The massive revenue brought a rapid increase in urbanisation. Between 1954 and 1964 the population of Tripoli grew by 64 per cent and that of Benghazi doubled, but many rural-urban migrants were poor, living in shanty-towns. The wealth was very unevenly distributed.
Revenue was not always spent effectively. The first 5-year plan (1963-68) earmarked 70 per cent of oil revenues for development. Although the amount spent was much more than envisaged, it equalled only 20 per cent of total revenue. Military expenditure increased, but agriculture declined dramatically: a long-term depletion of ground-water resources began and skilled labour left the land. Little was allocated to industry. Government health schemes were largely run by foreign workers, particularly doctors.
The government became increasingly inefficient and corrupt: the line between private and public wealth was indistinct, and scandal after scandal ensued. As private capital went into real estate, building and services, opposition to the monarchy increased and found an audience in the younger men who had initially benefited from the success story of the monarchy – the rapid development of education.
By 1968 there was a university, and 85% of those eligible to attend school were doing so. But there were few trained Libyan teachers, so the government appointed many Egyptians who introduced Nasserist ideology to their pupils. Cairo radio could be heard as well. By the mid-1960s a small professional class had grown up employed in the administration, the schools and the army. These newly educated Libyans began to demand that the oil wealth be used more equally and oil used as a weapon for the wider Arab cause.
There was great resentment that Libyan oil earnings were financing a government that backed the US and Britain, both supporters of Israel during the 1967 War.
During the 1967 Arab-Israeli war the government mouthed support for the front-line Arab states, but did not intervene. The heightened political consciousness led to popular protests and strikes, with oil workers closing the oil terminals. After the war, the western bases were even more important. Tobruk guarded the BP oil terminal at Marsa al-Hariga and the king’s palace. It was clear that the mounting political tension would eventually lead to a coup, and by mid 1969, the Egyptian government of President Nasser was already in touch with some senior army officers expected to organise a coup.