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Millions of US $ 19,131     71
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Col Mu'amar al-Qadhafi

Update No: 031 - (30/05/06)

Full Speed Ahead
American Secretary of State, Condoleezza Rice announced that the United States would resume full diplomatic relations with Libya and remove it from the list of nations that sponsor terrorism. The move formally ends 25 years of animosity between the government of Mu'ammar al-Qadhafi and the United States. Ms Rice said, "We are taking these actions in recognition of Libya's continued commitment to its renunciation of terrorism and the excellent cooperation Libya has provided to the United States and other members of the international community in response to common global threats faced by the civilized world since September 11, 2001". Predictably, given the spin that Washington has given to the process of diplomatic normalization with Libya that formally started in December 2003, Rice suggested that North Korea and Iran might also benefit from similar advantages should they decide to give up their weapons programs. Nevertheless, while the US official spin presents the normalization of Libya as a reward for good behavior, implying Libya will draw more benefit from this than Washington, the fact remains that the United States needs Libya's 'friendship' even more. Indeed, as oil resources become more expensive and rare, there is increased competition European, Asian (Taiwan's CPC has recently expressed interested in exploring two sites in Libya), and South American oil companies…, and their governments. While, much of the mainstream press appeared surprised over the normalization announcement, the real surprise is that the process took so long. It is possible that the alleged plot by Libya to murder Crown Prince Abdullah of Saudi Arabia in the summer of 2004 added a hurdle, even though the issue has been resolved and allegations were never "proven". Perhaps, of greater significance was the lobbying by survivors of the victims of the Pan Am 103 crash in Lockerbie. In 2003, Libya accepted responsibility for the 1988 bombing and agreed to pay $2.7 billion to the families of the 270 victims ($536 million). Libya has paid the bulk of the sum, while a final $2 million installment to each family remains outstanding. Libya said it would pay the final amount upon being removed from the terror list. The representative for the Lockerbie families has already demanded that Libya pay the amount. Senators and Representatives from New York and New Jersey, where many of the victims' families reside, were not pleased by the normalization announcement, suggesting they would oppose the establishment of U.S. diplomatic ties with Libya until it completed restitution to the victims' families. The senators and representatives said they would push resolutions calling on President George W. Bush not to restore full relations with Libya until it makes a final $536 million payment called for under a legal settlement with the families. 
The announcement of normalized relations between the United States and Libya - apart from whatever diplomatic and internal popularity benefits the US may gain on its own - will no doubt contribute to increasing Libya's oil production. The country currently produces 1.6 million bpd (less than it produced in the 1970's). Normalized relations mean that it will be much easier for the US and other countries to give Libya the necessary technology to increase production such that Libya may achieve its goal of producing some 3 million bpd by 2015. Some of this technology, according to industry analysts includes steam injection into underground reservoirs and horizontal drilling techniques (though the Spanish Repsol had already pioneered this technique in Libya at its Murzuq field in 1996). While US oil companies earned the legal right to resume exploration in Libya after an absence of almost 20 years, they did not have the same freedom of action and technological advantages of European and Asian companies (some of which won important concessions in the 2005 bidding) whose countries have maintained diplomatic relations with Libya throughout the sanctions period. The full diplomatic relationship means that American oil companies will be able to deploy all technological means at their disposal. It also means that in the near future transport links will be facilitated, with more flights to and from Tripoli and Benghazi not to mention the basic diplomatic hurdles of visas; US business people will be able to obtain them directly in Washington. Companies like Marathon Oil Corp., ConocoPhillips and Amerada Hess Corp. which returned to Libya in 2004-2005, will also face less diplomatic 'red tape' in delivering the equipment they need for exploration to Libya. 
Many had expected the normalization of relations to come sooner. Libyans seemed surprised by the decision last March to maintain Libya on the list of terror sponsoring states. The possible 'incriminating' motivations had been resolved. In April, the US State Department confirmed that Libya would not be removed from its list of state sponsors of terrorism. The United States praised Libya for the progress made so far and their growing cooperation, but stopped short of offering an explanation as to why Libya had not been 'promoted'. Cuba, Iran, North Korea, Sudan and Syria are on the current list. Libya was not pleased with the move, which was widely perceived as hostile as the decision almost coincided with the 20th anniversary of the US bombing of Tripoli and Benghazi on April 15, 1986. Libya complained that the United States has not yet apologized for that action, hindering trust between the two countries. While unstated, the retention of Libya in the state sponsors of terror list is likely due to the pressure of the families of survivors of the December 1988 bombing of Pan Am 103 over Lockerbie, Scotland - even as Libya has been paying compensation to those families. In addition, the alleged attempt by Libyan agents to assassinate then Saudi Crown Prince Abdullah in 2004 also found a resolution, when he became king last summer dissolving the dispute with Libya and re-establishing full diplomatic relations.
Once again, as was likely the case for the initial diplomatic openings since December 2003, when Col. Qadhafi announced his famous renunciation of WMD's; oil companies such as Occidental and ConocoPhillips likely played considerable influence on the administration to reverse its initial decision (expected by some Washington analysts) to maintain Libya on the 'terror' list. As the price of oil continues to hover around $70/barrel, the US administration would have hurt some of the main beneficiaries of its policies (the oil companies) by maintaining the status-quo on Libya. To a secondary degree, there may even have been fears that Libyan disappointment at the last April's 'terror list' decision could have reversed the Libyan economic reform and international opening process, promoting a return to the idiosyncratic international relations policy of the past, which could have further undermined US diplomatic efforts in the Middle East. The cabinet shuffle that saw the replacement of the reform minded Shukry Ghanem with the somewhat more conservative Baghdadi al-Mahmoudi last March was also a signal that the United States had to give Libya more 'carrot and less stick' in order to perpetuate policy changes that are not popular at all levels of Libyan society and power circles. 
News of the normalization of Libyan-American diplomacy overshadowed an important announcement concerning the opening of the Tripoli stock exchange. For the time being, the exchange will feature listings from the recently privatized companies in the fields of steel, cement and milling as well as the stock of the Sahari Bank and other financial institutions.


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