Gadhafi Son Warns of ‘Rivers of Blood’ as Libya Revolt Spreads

Muammar Qaddafi’s son called on protesters in Libya to engage in dialogue or face a civil war that risks the country’s oil wealth, as violence escalated amid reports protesters seized control of the second-biggest city.

“Instead of weeping over 84 dead people, we will weep over hundreds of thousands of dead,” Saif al-Islam Qaddafi said on state television. “Rivers of blood will flow.”

Security forces and protesters fought overnight in the capital, Tripoli, with snipers shooting from rooftops and gunmen opening fire from vehicles carry pictures of the Libyan leader, the Associated Press said, citing witnesses. Protesters in Benghazi, the second-biggest city, claimed to have taken control of the city after violent clashes yesterday, the AP said. Human Rights Watch put the past week’s death toll at more than 200. Oil companies including BP Plc halted operations.

Libya, holder of Africa’s largest oil reserves, is the latest country in the region to be rocked by protests ignited by the ouster of Tunisia’s president last month and energized by the fall of Egypt’s President Hosni Mubarak on Feb. 11. Violence has flared in Yemen, Djibouti, Iran and Bahrain as governments sought to crack down on demands for change.

Oil surged to the highest in more than two years in London, with Brent crude for April settlement adding as much as 2.5 percent to $105.08 a barrel, the highest since Sept. 25, 2008, and traded at $104.56 at 11:08 a.m. local time. Persian Gulf shares extended declines, with Dubai’s benchmark index dropping to a six-month low.

Demands ‘Not Logical’

In Yemen, President Ali Abdullah Saleh held a press conference in the capital, Sanaa, to rule out meeting the demands of protesters seeking his ouster. Demonstrators took to the streets for an 11th day as Saleh said their calls for regime change are “not logical.”

Thousands gathered outside Sana’a university and in the southern provinces of Aden and Taiz, while followers of the Shiite Houthi rebel group joined in the protests by holding a demonstration in the northern Saada province, according to activists in Sana’a. The country’s main opposition group has rejected Saleh’s offer for dialogue as long as protesters are being attacked. At least five people have been killed.

Bahrain Shiites

In Bahrain, home to the U.S. Navy’s Fifth Fleet, seven opposition groups are drawing up demands and discussing the government’s call for dialogue, said Ebrahim Sharif, head of the National Democratic Action Society. Protests have been led by the Shiite Muslim majority, which says it is discriminated against by Sunni rulers.

Thousands of Bahrainis yesterday poured back into the central square that has become the focus of protest in the Bahraini capital, Manama. Tanks, armored personnel carriers and riot police withdrew on the orders of Crown Prince Salman bin Hamad Al Khalifa, after earlier crackdowns left at least five dead. Unions called off a general strike planned for today.

Bahrain’s credit rating was cut one level today by Standard & Poor’s Ratings Services, which predicted that protests against the government will continue. Yields on the country’s 10-year dollar bonds jumped 34 basis points to a record 6.96 percent.

Libya’s Saif al-Islam Qaddafi, who sported stubble and was dressed in a dark suit and tie during his television address late yesterday, said the army will “impose security and get things back to normal, whatever the price.” He said an escalation of violence would drive oil companies away and risk U.S. intervention to prevent “an Islamic emirate in the middle of the Mediterranean.”

Production Halts

Royal Dutch Shell Plc today said it evacuated the families of personnel in Libya, and Norway’s Statoil ASA closed its offices and said it is evacuating expatriate workers. BP Plc suspended onshore exploration. Production at the Nafoora field, operated by the state oil company, was halted because of a strike, Al Jazeera reported.

Shares in Italy’s Eni SpA, which produced 244,000 barrels of oil equivalent a day in Libya in 2009, fell 4.7 percent at 1:20 p.m. in Milan. The company also operates the Greenstream gas pipeline from Libya to Italy.

Shokri Ghanem, chairman of Libya’s National Oil Corp., said in a phone interview that he had no information about a halt or disruption in crude output.

‘Realms of Freedom’

Qaddafi’s son also offered dialogue with the opposition, a national debate on the constitution, higher wages and unemployment benefits and legal changes to “open up the realms of freedom,” and said the army had made errors in handling the protests.

Thousands of people demonstrating yesterday in Benghazi, Libya’s second largest city, were met by gunfire from forces loyal to the regime, Human Rights Watch said, citing reports from witnesses. The U.S. has received “multiple credible reports that hundreds of people have been killed and injured,” State Department spokesman Philip J. Crowley said.

“The speed of the whole thing in Libya has surprised most of the specialists because Colonel Qaddafi established a very special repressive system of his own,” Amin Saikal, director of the Centre for Arab and Islamic Studies at Australian National University, said in an interview on Bloomberg Television. “Probably the casualties will be extremely high and therefore Qaddafi will be left with very little credibility to really go on and govern the country for much longer.”

‘Popular Revolution’

The demonstrations show signs of fracturing Qaddafi’s rule. Libya’s representative to the Arab League said he had resigned from his post and had “joined the popular revolution,” Egypt’s state-run Middle East News Agency reported yesterday.

David Cameron, the U.K. prime minister, denounced violence against Libyan protesters as “appalling and unacceptable” during a visit to Egypt today, where he was the first Western leader to visit since the fall of Mubarak. Cameron said he will use the visit to encourage Egypt’s army, which is running the country, to stand by pledges of a transition to democracy.

Cameron is also seeking to boost U.K. trade with the region. His government has revoked arms export licenses to Bahrain and Libya in recent days as security forces used violence. Britain was the second-biggest supplier of arms to Bahrain in the five years through 2009, behind the U.S., according to the Stockholm International Peace Research Institute, which monitors the weapons trade.

Demonstrations also were reported yesterday in Iran, where one person was killed in fighting between protesters and supporters of the government, according to Al Arabiya television. There were similar clashes last week in Djibouti, the Horn of Africa nation that hosts the only U.S. military base on the continent.

Change in Jordan

Jordan’s King Abdullah, who replaced his government two weeks ago amid protests demanding more democracy and higher living standards, told the country’s political leaders yesterday that he expects the new administration of Prime Minister Marouf Bakhit to implement political and economic changes without hesitation. He said past opportunities for change were missed because of “people with private agendas who resisted reform to guard their own interests.”

Analysts including the Eurasia Group, a New York-based company that assesses political risk, have warned of the risk of unrest spreading to Saudi Arabia, the world’s biggest oil exporter.

Saudi Arabia neighbors Bahrain and has a Shiite minority population in the east, where most of its oil is produced. It was the lowest-ranked Middle Eastern country in the Economist Intelligence Unit’s 2010 Democracy Index, which classified all Gulf nations as authoritarian regimes.

Swap contracts for Saudi Arabia, used as a measure of confidence although the country has no debt to insure, jumped 11.5 basis points to 141.5 today and have almost doubled since the end of January, according to CMA prices. Saudi Arabia’s Tadawul stock index fell for a seventh day today, dropping 0.6 percent at 3 p.m. in Riyadh. The Bloomberg GCC 200 Index of Gulf stocks fell 0.5 percent to a four-month low.