LIBYA: The world comes calling

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Since last December's deal with the UK and US governments in which Libya agreed to renounce its non-conventional weapons programmes, barriers have been swept aside; both those imposed by the West and, to some extent, internal ideological misgivings.

In July, Libya was formally accepted as a candidate to join the World Trade Organisation (WTO). The European Union (EU) also appears to be intent on drawing closer to Colonel Muammar Ghaddafi, removing its own trade barriers in return for increased cooperation on clandestine immigration.

Companies from Europe and the USA are now competing for contracts in the expanding Libyan economy, with its main motor of oil production set to increase over the coming year.

US President George W. Bush announced that sanctions would be removed in four areas. The executive order that required US companies to obtain US Treasury licences before doing business in Libya was dropped. Restrictions on aviation between the two countries were revoked, as was the freeze on Libyan assets in the US - valued at $1.3bn. Last but by no means least, was the green light for imports of Libyan oil into the country.

There was no comment from President Bush on the decision, but an official White House statement read that, "Libya's efforts open the path to better relations with the United States and other free nations." The US likes to hold up the negotiated route to a non-proliferation of weapons deal with Libya as a spin-off from the get-tough approach with Saddam in Iraq, but does not want to be seen as being 'bounced' into concessions by Colonel Ghaddafi.

The withdrawal of trade sanctions, however, came just two days before the expiry of a 'deadline' set by the Libyan government, after which the relatives of the Lockerbie plane bomb victims would receive less compensation if the sanctions had remained in place.

An extra $4m was expected in compensation to the families of each of the 270 people killed when Pan Am Flight 103 blew up over the Scottish town of Lockerbie in 1988. This doubled the figure the families had already received. The figure could be made into a round $10m per family if the US government removes Libya from its list of state sponsors of terrorism. Libya's inclusion on this list means there are still some trade restrictions in place affecting material of a military nature.

ITALY TAKES THE LEAD

For the moment, the US authorities say they are "seriously concerned" about allegations that Colonel Ghaddafi ordered the assassination of Saudi Crown Prince Abdullah. The alleged plot has come to light in the trial of Abdurahman Alamoudi, a founder of the American Muslim Council and the American Muslim Foundation, currently on trial in the US for illegal dealings with Libya.

Alamoudi claims to have served as a go-between between top Libyan officials and Saudi dissidents as part of a plot to kill the Saudi leader after a public spat between Ghaddafi and Prince Abdullah at an Arab league meeting in 2003.

US attorney general, John Ashcroft, said his administration was taking the claims seriously, adding "our relationship with Libya cannot be fully normal until it's absolutely clear that Libya's no longer participating in any kind of terrorist activity".

European nations, meanwhile, decided to go one better than their transatlantic rival. At the bidding of countries like Italy and the UK, restrictions on arms sales to Libya were lifted days after the US decision to raise its trade barriers. The move is part of closer cooperation between the EU and Libya in areas of common concern, chiefly that of illegal immigration into the European trade bloc.

Libya had argued that without patrol boats, helicopters and night-vision equipment, its security forces had little hope of controlling the flow of migrants departing from its 6,000 kilometres of borders, a third of which is coastline.

Italy, the EU nation most directly affected by the arrival of undocumented immigrants departing from the Libyan coast was vehement in its agreement with the Libyan position, even threatening to go it alone in breaking the EU restrictions should its EU partners not agree. Now, Italy is the country best placed to benefit from sales of such military equipment, as it has made an important agreement with Libya to work together to reduce the levels of clandestine immigration between the two countries.

The agreement involves the training of anti-immigration patrols by Italy, in addition to the launching of joint operations in the waters between Italian and Libyan shores.

A repatriation programme has led to the return of several thousand migrants, "some 4,500 of whom were bound for Italy", according to Italy's interior minister, Giuseppe Pisanu. Speaking in Tripoli at the end of September after talks with his Libyan counterpart on implementing the agreement, Pisanu said he hoped that such immigration could be "reduced to zero" thanks to increased cooperation across the Mediterranean.

The EU arms embargo against Libya came into force in 1986 after the bombing of the La Belle nightclub in Berlin, killing two US soldiers, one Turkish citizen and injuring 230 others. Recently, Libya's Ghaddafi Foundation, headed by the leader's son, Seif al-Islam, reached an agreement with legal representatives of the non-American victims of the bombing.

OIL COMPANIES MOVING BACK

More major US oil companies have drifted towards entry into the Libyan oil industry over the past six months since the US administration's original decision to relax trade sanctions. The two biggest US oil companies, Exxon Mobil and ChevronTexaco, say they are interested in pursuing opportunities in Libya, attracted by the planned expansion of its oilfields. Meanwhile, Marathon oil, Amerada Hess and ConocoPhillips, the so-called Oasis Group, were still involved in talks with Libya to resume operations they were forced to abandon in 1986. An announcement was expected any day at the time this magazine went to press.

The first actual deal in the energy sector since the thawing of US and Libyan relations came in July. Exxon Mobil agreed to sell its fuel distribution business in Niger to Tarn Oil, the international investment arm of Libya's National Oil Company.

Over the summer, the state-run National Oil Company announced its delayed EPSA-4 oil and natural-gas licensing round for 15 exploration areas, in the end somewhat larger than the eight blocks announced earlier in the year. The bids will be opened next January, and the decision is yet to be made on two criteria: firstly, what percentage share the company is prepared to pay the state, and the size of the signing on bonus. Besides the interest of the US majors, Occidental announced that the company also planned "to participate in the tender".

Houston's Apache, which is already active in nearby Egypt, also showed an interest in the EPSA-4 area. Spokesman Tony Lentini said that Libya "meets a lot of the criteria we would have". Another 13 US oil companies have formed a consortium to look for oil and gas opportunities in Libya, according to Houston American Energy, one of the participants.

European majors are also in the hunt for new concessions. "Like all oil companies, we would be interested in looking at any bidding round to acquire exploration acreage" a Shell spokesman in London said.

The Norwegian Norsk Hydro company, already involved in two oilfields in Libya, recently signed an exploration cooperation agreement with German energy company Wintershall AG. A spokesperson told the press that the company would be bidding on any attractive projects.

Libya has then gained its initial objective of attracting foreign investment in the oil sector, and future activity is set to increase still further, according to the chairman of Libya's National Oil Company. "We aim to announce a new licensing round before the end of this year. It will probably be a further 15 exploration areas," Abdullah Salem El-Badri announced to Dow Jones Newswires at an OPEC seminar in September. El Badri also claimed that through existing projects, Libya's oil-production capacity will climb around 18% to 2m barrels a day by mid-2005.

But western commercial interests should not expect Libya to turn into a haven for multinationals overnight. The Libyan approach to its mobile telephone market shows how Ghaddafi intends to develop domestic markets along the lines of controlled competition, rather than a free-for-all.

Libyana's director, Mohammed Ghaddafi, is another son of the country's leader. He told the BBC that the company was providing a "cheaper option for Libyans", although the price of opening a new line costs $478. While admitting that foreign mobile network companies could "invest millions in establishing their companies here", Mohammed Ghaddafi argued that these companies would not re-invest their profits in the country.

"The reality is that within a few years they would generate billions in profit, which would be taken abroad. This would be counter-productive to our economy," the leader's son pointed out. Libya does want to attract inward investment, but only on the right terms.