The lure is Libya's oil industry

Dec 05, 1999 01:00 AM

When Italy's prime minister landed in Tripoli, he couldn't have failed to notice the lack of pomp for the first Western leader to visit in eight years. The airport was festooned with colourful posters of African leaders who have come to Libya, but there was none of arriving Premier Massimo D'Alema. And no Italian flags fluttered in the city. The muted welcome carried a not-so-subtle message: As Libyan leader Moammar Gadhafi gets ready to deal with the West, he will do so at his own pace and on his own terms.
The West is likely to play Gadhafi's game. The lure is Libya's oil industry, where investment opportunities abound. With proven reserves of 30 bn barrels, Libya has as much oil as Norway and Britain combined, and production costs for its high-grade crude are among the world's lowest.
During a business conference in Tripoli earlier last year attended by more than 100 executives from around the world, Gadhafi made an unexpected appearance to declare: "You are welcome to invest in Libya. We are not pirates or rebels or terrorists."
The United States imposed economic sanctions on Libya in 1986, accusing it of sponsoring terrorism, opposing the Middle East peace process and harbouring Palestinian guerrilla groups.
Separate UN sanctions imposed in 1992 were suspended last April 5 after Libya handed over two alleged intelligence agents charged in the 1988 bombing of a Pan Am jetliner over Lockerbie, Scotland. The UN sanctions have done little damage to Libya's economy, thanks largely to an assured market in Italy.
Italy buys 43 % of Libyan exports, most of it oil and natural gas. Barred by the UN sanctions from buying spare parts for its oil production facilities, Libya got the equipment through third parties, the extra cost hardly denting its $ 7 bn in oil sales in 1998. The UN ban on airline flights to Libya was seen as an inconvenience, circumvented by taking the ferry to nearby Malta.

The U.S. sanctions have boomeranged on American companies. Houston-based Conoco, which first struck oil in Libya in 1955, has had to forgo the production and sale of $ 5 bn worth oil since it was forced to pull out in 1986. The void caused by the American withdrawal was filled by European companies like Italy's ENI, Spain's Repsol and Austria's OMV. "No one likes to sit on their hands while their competitors are out there looking for oil," said Peter Bogin of Cambridge Energy Research Associates, a Paris-based consulting firm.
While the United States has remained aloof, Europe has rushed to embrace Libya. A high-level British trade delegation that visited recently included representatives of British Aerospace, HSBC Investment Bank and Taylor Woodrow Construction. At the September business conference, Planning Secretary Jadallah Azuz al-Tahli said Libya wants to invest $ 35 bn in various projects over the next five years. Up to $ 14 bn in private funds will be sought for investment in factories, infrastructure, tourism and agriculture, he said.
The United States is closely watching Italian overtures to Libya.
Noting D'Alema's visit, State Department spokesman James Rubin said U.S. allies in contact with Libya should urge Gadhafi to follow through on promises not to engage in terrorist activities. He added that the United States is not ready to lift its sanctions against Libya.
Nonetheless, U.S. Deputy Assistant Secretary of State Ronald E. Neumann noted that Libyan support for terrorism is declining. He pointed to the expulsion of the Abu Nidal Organisation, a Palestinian guerrilla group. "As far as we can tell, the Libyan government's actions were not window dressing, but a serious, credible step," Neumann said. Gadhafi has often said he wants to normalise relations with the United States.

Source: AP
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