Riding with Gaddafi

Three years ago, Libya's ascetic, rabidly anti-Western President Muammar Gaddafi flew into a rage about a mild satire of himself printed by the Turin daily La Stampa. He threatened to have Fiat, the Italian megacompany that owns La Stampa, put on the Arab boycott list unless it fired the paper's Jewish editor, Arrigo Levi. Fiat Chairman Giovanni Agnelli stood by Levi, and the matter was forgotten. Time and oil money, however, can change the political-economic balance of power, and last week Levi had a new story to print. Agnelli announced that he is taking on a new partner--of all people, Gaddafi.

It was a devastatingly ironic example of petropower. The Libyan Arab Foreign Bank will lend Fiat $104 million and spend an additional $311 million to buy newly issued Fiat stock and bonds. That will give the government of Libya--which was an Italian colony until the end of World War II--an immediate 10% ownership of Fiat, the world's fifth biggest automaker, and eventually perhaps 13%; the Agnelli family's controlling interest will shrink from 35% to 30%. Libyans will take two seats on Fiat's 15-man board of directors and one place on the five-man executive committee. That will be a blow to Italian pride, but the government in Rome, which must approve foreign investments, is likely to go along. Reason: the $415 million that Libya is putting up will wipe out about a fourth of Italy's balance of payments deficit.

What made Fiat do it? Although it has published no 1976 figures, the company seems to be rebounding well from two barely break-even years (1975 profits: $164,000 on sales of $4.9 billion). Still, says Agnelli, Fiat could use some more money, and Libya offered cash on attractive terms. In short, Agnelli, who insists that he has never met Gaddafi, presented the transaction as a straight business deal.

Yet the political connotations cannot be ignored. There is little doubt that Gaddafi, in approaching Fiat, relished the opportunity to buy a piece of international respectability and take a mild slap at Libya's former colonizer, all in one gesture. Should Gaddafi, an activist who is unlikely to be a silent partner, continue to make similar investments, radical Arabs--including terrorists whom Gaddafi finances--could have some power levers to pull. One example: Libya's archrival Egypt makes 12,000 Nasr autos a year under Fiat license; Gaddafi's Fiat connection gives him a new stick to shake at his neighbors to the east. And what about Editor Levi? Agnelli, who is still Fiat's--and Levi's--boss, said last week that he "would behave exactly the same way" if Levi and Gaddafi squared off again. But Gaddafi has a long memory--and 10% of Fiat.

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