On May 15 this year, the United States announced its long-anticipated decision to restore full diplomatic relations with Libya. This decision will pave the way for Libya’s removal from the US list of states sponsoring terrorism and harbouring terrorists.
In addition, the country’s name will be removed from the annual certificate of countries not cooperating fully with US anti-terrorism efforts. The US Senate is expected to pass these preconditions to the full diplomatic restoration of ties by July 1.
The restoration of ties between these two countries — for the first time since 1979 — comes against a backdrop of ongoing closed-door negotiations since 1999 between Libya and the international community over its alleged role in the Lockerbie bombing.
Libyan leader Moammar Gadaffi had been accused by the international community of being behind the terrorist bombing of a Pan Am flight over Lockerbie, Scotland, in 1988, which killed 270 people. This came as a response to the 1986 bombing by US jets of the Libyan capital, Tripoli, and military bases — which resulted in the death of Gadaffi’s daughter — following the country’s alleged role in a Berlin disco bombing that killed US troops.
After years of defying United Nations sanctions and international isolation, Gadaffi surprised the international community when he agreed to send two Libyan secret-service agents accused directly implicated in the bombing to a special court in The Netherlands in 1999.
Libya continued its rapprochement with the West following the September 11 2001 terrorist attacks on the US. Fearing a similar predicament that his fellow dictator Saddam Hussein faced in Iraq and following the regime change in Afghanistan, Gadaffi capitulated to international pressure in December 2003 by declaring his intension to abandon biological, chemical and nuclear weapons research.
At the end of December 2003, the International Atomic Energy Agency ended its visit to the country. Mohamed ElBaradei, the head of the UN’s nuclear watchdog, declared that his inspectors had been allowed to visit four previously unseen nuclear facilities around Tripoli. Libya also began to cooperate closely in US anti-terrorism campaigns.
In addition, the country started delivering on its promise to pay compensation to the relatives and families of the victims of the infamous Pan Am flight while taking responsibility for the attack for the first time. Initially the $2,7-billion compensation offer was agreed to be paid in three stages: 40% to be handed over when UN sanctions were dropped; another 40% when American sanctions followed suit; and the remaining 20% when Libya was removed from the US State Department’s list of sponsors of international terrorism.
Libya’s compliance with the international community on resolving the Lockerbie bombing, the dismantling of its weapon programmes and the state-funded sponsorship of terrorism and terrorist groups around the world, and the subsequent lifting of sanctions and normalisation of relations have been greatly welcomed.
For much of the mid-1980s and 1990s, Libya was looked upon as a pariah state by governments around the world. The deepening economic sanctions continued to hurt the Libyan economy, heavily dependent on oil exports and American mining technology. The country produced approximately 1,6-million barrels of oil a day during much of this period, half of its 1970 peak of 3,3-million barrels a day. However, with normalisation of relations with the US, it expects this to increase to 2,1-million barrels a day in five years’ time.
The devastating effects of political isolation and economic sanctions have been felt in all sectors of Libyan society for decades. The country’s workforce has been growing at a rate of 4% yearly, while unemployment is placed at 25% in a country of five million inhabitants. Government salaries, the main income for approximately two-thirds of the workforce, have stagnated until recently. At approximately $3 000 a year, state wages are far below the purported GDP per head (at purchasing-power parity) of $12 000.
Despite an accumulated foreign-exchange reserve of approximately $20-billion, the country has only one five-star hotel and about 20 cash-point machines to show for it.
It is not surprising that the Libyan government is eager to improve relations with the US and the rest of the international community in order to open up its economy to foreign investors, particularly in its vast, untapped oil and gas industry.
As the second-largest oil producer on the continent behind Nigeria, Libya holds approximately 36-billion barrels of proven oil reserves (almost 3% of the known world total), as well as 40-trillion cubic feet of gas reserves. However, only approximately 25% of the country has been explored for gas and oil. Analysts contend that the country probably holds more than 100-billion barrels of oil in its vast deserts. Even more importantly, its crude oil is particularly attractive due to its very low sulphur content; it requires much less refining than higher sulphur oil.
Given the large oil and gas reserves and the lifting of sanctions, a number of Western oil companies, including American ones, are returning to Libya. Representatives of Amerada Hess, ConocoPhillips and Marathon have begun discussions with Libyan authorities on extending their existing concessions in the country. In 2004, Royal Dutch/Shell signed a preliminary agreement worth $200-million in gas exploration with the Libyan government. In 2006, the government published the winners of the latest round of bids for oil exploration. Some of the winners included Occidental, Amerada Hess and ChevronTexaco.
Aside from the expected benefits Libya hopes to reap from increased foreign investments in its energy industry, the normalisation of relations between the North African country and the international community is expected to benefit US foreign policy in the Middle East in the short to medium term.
The US contends that quiet closed-door diplomacy and negotiations with Libya have worked in bringing it back to the fold of international community. It hopes that this experience can be emulated in such a way to bring other states, especially Syria and Iran, to negotiations — in Iran’s case, in a bid to pressure it to discard its nuclear programme and ends its alleged support of terrorist groups in the region. Also, pressure on Iran and Syria could more than likely put the spotlight on Israel, long suspected of acquiring and building nuclear weapons.
Hany Besada is the Business in Africa researcher at the South African Institute of International Affairs. Besada’s research interests include economic development, Middle East studies, international diplomacy, international relations and conflict resolution