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Books on Libya

Update No: 051 - (29/02/08)

Still Paying for Lockerbie. US Companies Still Unable To Reap Full Benefits from Libya
Although it has been almost two years since the United States restored diplomatic ties with Libya, the legacy of the bombing of Pan Am 103 over Lockerbie, Scotland, killing 270 people, continues to haunt US-Libyan relations. Despite a continued favorable attitude from the White House, the Senate issued legislation in January that further complicates Libya’s compensation payments for Lockerbie, as Congress fails to be impressed by Libya’s efforts to atone for its past. Democratic Sen. Frank Lautenberg of New Jersey (and presidential candidate Sen. Hillary Clinton) linked legislation to an Iraq war funding bill, which allows terrorism victims to collect damages by freezing the assets of target governments such as Libya. Some of the Pan Am 103 families say Libya reneged on the last USD two million-per-family installment of a legal settlement. The biggest losers from this legislation appear to be American companies, who now fear investing in Libya because of the asset freeze possibility. Apart from the Lockerbie case, last January, an American judge demanded that Libya also compensate relatives to Americans killed after a suitcase bomb exploded aboard a French UTA airliner over Niger, a terror act attributed to (and apparently accepted by)Libya by a German court . 

Ever since the door to full diplomatic ties was opened between Libya and the United States, it was expected that Secretary of State Condoleezza Rice would visit Tripoli. There have been other high level US visits to Libya since the thaw in relations began in 2004. A visit by the Secretary of State, however, would send a strong signal to US companies wanting to do business in Libya, that their investments are secure. Oddly, US companies face more political risk for investing in Libya because of their government rather than from any issues inherent to Libya’s situation. The U.S.-Libya Business Association believes that the Lautenberg law would force American companies investing in Libya to defend their assets in court, embroiling them in long legal battles. US oil companies such as ConocoPhillips, which were among the first to take advantage of better US-Libyan relations, are concerned that the Lautenberg law could compromise existing as well as future projects; in fact, European and Asian companies, whose governments are doing everything possible to improve already good relations with Libya, gain an additional advantage over American competitors. Libya’s influence is growing. It received almost USD 40 billion in oil revenues in 2007, more than in the 2006 total, said Shukry Ghanem, president of the Libyan National Oil Company (NOC); Libya is also Africa's second-largest oil producing country, with current production at 1.8 million barrels per day, having oil reserves estimated at 43 billion barrels and expecting a doubling of production by 2010. 

The diplomatic stall is all the more complicated, because the Congressional stance on Libya has also blocked the nomination of an ambassador to Tripoli. The White House nominated Gene Cretz as the ambassador to Libya last July, but the confirmation hearings are being obstructed by Congress. Sen. Joseph Biden, head of the Foreign Relations Committee, who has been vociferous about Libya’s compensation obligations to the families affected by terrorism, has been active in blocking confirmation hearings. The Senate is also withholding the approved USD 110 million to build a US embassy in Tripoli. The State Department is not pleased about the situation, claiming that Libya’s efforts to relinquish terrorism should be rewarded to serve as an example to other countries listed as Pariahs or as members in ‘evil axes’. The new obstacles to US-Libyan relations also deter Libya from investing windfall oil profits in the United States. Libya can still invest, but it risks having those assets frozen. Libya’s foreign affairs minister, Abdel-Rahman Shalgam, visited Washington in January and asked Condaleezza Rice to "correct" the Lautenberg legislation, noting that it is straining relations between the two countries. The best that Rice has been able to offer, which is perhaps also the most reassuring aspect of the current rift in US-Libyan relations is that the US Secretary still expects to visit Libya before the end of her term. Ultimately, Libya is still paying the price for the over three decades of hostility and suspicion that have marked its relations with the United States. Libya and the United States have exchanged diplomatic officials; neither one works out of an official embassy, both are constrained by a rehabilitation that is still a work in progress. In this context, it is interesting to note that the United States claims to have softened its ambitions to establish an African military command base (the so called AFRICOM is now based and run from Germany). 

Failure of AFRICOM as Sign of Waning US Influence in Africa
The US appears to have backed off the plan for the time being, probably because their plan received very little interest from African countries, Libya being one of the candidates, with the exception of Liberia. The renunciation of the plan is an admission of defeat of sorts; the US has failed to convince Africans of their ‘good intentions’. The initial opposition to the plan started in South Africa, but Libya and other weighty oil-rich African states, such as Algeria and Nigeria also rejected AFRICOM. Many African countries have found a renewed sense of unity, despite the many problems, and there has been more effort by African organizations and single countries, like Libya, to resolve regional disputes. If AFRICOM is to be interpreted as an effort for the United States to secure its oil interests in Africa, African countries saw it as a way to contrast the growing, and no strings attached, Chinese influence in those very countries. Chinese companies have won several prospecting rights in Libya in recent auctions and they could make gains – with their mix of aid, infrastructure development, financing and willingness to explore unproven fields – at the expense of US companies and interests. In the security front, it is also noteworthy that Libya appears to be interested in pursuing a different route than the one advocated by the United States. The Qadhafi International Foundation for Charity Associations and Development - by the Seif ul-Islam al-Qadhafi, son of Libyan leader Mu’ammar al-Qadhafi, is re-launching talks with Libyan islamist organizations such as the Libyan Islamic Fighting Group (LIFG), made up by former Libyan fighters in Afghanistan, who returned after fighting a war against the Soviet Union in the 1980’s. The Foundation said that the talks aim to secure the release of one third of the group members from Libyan jails. LIFG was involved in actions to overthrow regime of al-Qadhafi to establish an Islamic state in Libya. 

While the United States has added obstacles, getting in the way of opportunities for American companies, the European Commission has taken concrete steps to increase economic and political relations with Libya. The EU expects to conclude a full agreement with Libya before the end of 2008, which will improve opportunities for the Bloc’s oil and gas companies, many of which have had dealings in Libya even during the periods of most isolation. Libya and North Africa have become more important in recent years as the EU seeks to diversify sources of oil and gas away from Russia, which is the biggest supplier and because it is believed that gas produces less of the carbon emissions blamed for global warming. The EU has proposed a free trade deal and an agreement on controlling illegal migration with Libya – an area where Libya has already started to take action. Libya shall therefore become an even more important player in the Mediterranean region and in Africa within a wider framework for relations with the EU. The agreement, which will likely be approved by the Union’s 27 member states, would include political, social, economic, commercial and cultural ties. Of course, this process is made possible by last summer’s release of six imprisoned foreign medics, accused of deliberately infecting with AIDS more than 400 children at a Benghazi hospital.

Oil News
Nevertheless, in spite of emerging difficulties for the United States in Libya and Africa in general, NOC ratified an exploration agreement with Exxon Mobil in February for explorations of hydrocarbons offshore in Area 21. The investment is valued at an estimated USD 97 million, but Exxon will also have to pay a further USD 25 million to fund training programs or scholarships for Libyan citizens as part of the bidding rules introduced last year to spread more benefits to the population. Libya is very interested in developing natural gas resources and it has also signed deals with European companies as part of its first gas-focused exploration licensing round held last December. Libya expects to raise production to 3 billion cubic feet per day (bcfd) by 2010, with a potential for 3.8 bcfd by 2015, while current production stand at 2.7 bcfd. Libya and BP have also ratified the deal that former prime minister Tony Blair signed last year, shortly before leaving office. The formal ratification was made possible by the UK government to agree to include Abdelbaset Ali Mohmed al-Megrahi, a Libyan intelligence officer jailed for his part in the 1988 Lockerbie attack, in a deal to repatriate Libyan prisoners held in British jails. Scottish politicians are annoyed by the move – though the role of al-Megrahi in the Pan Am 103 bombing has been questioned by some members of the very police force investigating the crime. The Scottish Criminal Cases Review Commission concluded last year that he may have suffered a miscarriage of justice. As for Libya, it just needed a ‘good sign’ to ratify the deal.    

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