Global Policy Forum

By Hector Igbikiowubo

Some are already labelling it the dawn of a new era - Colonel Muammar al-Gaddafi's personal perestroika. Others refer to Libya's decision to apologise to the United Nations for the Lockerbie bombing as little more than a cynical long-term investment designed solely to reap the huge financial rewards that open trading with the West, particularly that which the United States will bring.

When Mikhail Gorbachev first published his perestroika manifesto in the mid-1980s, he asserted that it was a blueprint for the Soviet Union to emerge into global industrial competitiveness.According to economic experts, Libya, cut off from the US through crippling economic sanctions, currently finds itself in a similar position to the pre-Gorbachev Soviet Union.

In June 2003, backed up with an announcement of Libya's intention to open up its economy and to attract foreign capital, Col Gaddafi publicly revealed that the country's public sector had failed and should be abolished, and called for the immediate privatisation of the country's oil sector.The decision came as no surprise. As Africa's major oil producer and one of Europe's biggest North African oil suppliers, Libya estimates that United Nations sanctions have cost the country over $37 billion dollars in lost oil revenue since 1992.

Small wonder then that with the potential to become the world's sixth biggest oil producer, few of the British relatives of the Lockerbie victims genuinely believe that Col Gaddafi's decision to pay the Lockerbie victims $1.7 billion compensation is a genuine gesture of remorse. In the event that sanctions, particularly US sanctions, are permanently lifted, the future is certainly looking bright for Libya's economy. The reasons for this are numerous. Libya provides extremely high grade crude. It has very low production costs and the oilfields are close to the refineries and markets of Europe. In addition, despite almost half a century of exploration, Libya remains largely unexplored with vast oil and gas potential.

Earlier this year, the Aberdeen-based oil services firm, the Abbot Group, revealed it was poised to cash in on the possible lifting of sanctions against Libya, claiming that open trade would triple its annual turnover in the country to over £30 million. Those huge profits for a relatively small Scots firm are just the tip of the iceberg.

With the talk of American sanctions being lifted before the end of the year, US oil firms such as Conoco, Marathon, Amerada Hess and Occidental, all forced out of Libya by Ronald Reagan's 1986 executive order, are also eager to return.

In December 1999, US oil company executives from Oasis and Marathon travelled to Tripoli, with US government approval, to visit their old oil facilities in the country. In March 2002, the US State Department said it would permit Marathon Oil to hold discussions with Libyan officials while sanctions remained fully in place.

One leading economic expert suggested to The Scotsman last night that Libya's vast potential has long been part of the future strategy for the world's major oil firms. He said: "For many oil companies, dealing with Gaddafi is a troublesome side-issue. If, after decades of erratic, troublesome, and militant anti-West behaviour, the Libyan leader wants to shake off his pariah status, then so be it. The economic reality is that the untapped oil and gas reserves in the region are vast and Libya needs the West's technology to get to it and export it." The events that led to the Lockerbie bombing are generally believed to have begun on July 3, 1988, when a missile-control specialist aboard the US frigate Vincennes, mistook an Iran Air airliner on a routine flight to Saudi Arabia for a MiG-25 and shot it down over the Persian Gulf, killing everyone on board. Five-and-a-half months after the Iran Air catastrophe, Pan Am Flight 103 from Frankfurt to New York via London, was blown out of the sky by a bomb.

In the wake of the disaster, British investigators and specialists from the FBI and the US National Transportation and Safety Board, analysed the remains of the plane and identified a possibly unaccompanied suitcase bearing tags that they later said, indicated that it had been marked by Libyan Air to fly on Air Malta from Valletta to Frankfurt, and then to be transferred to the Pan Am flight for London and the connecting flight to New York.

Suspicions that two Libyan Air officials in Valletta at the time were responsible were heightened by US intelligence reports that it had intercepted a radio message from Tripoli to a Libyan government office in Berlin on December 22, 1988, that said, in effect, "mission accomplished".

In 1991, armed with the details of this intercept and the results of the long investigation at Lockerbie, the UN Security Council adopted a proposal by the UK and the US that Libya allow either Scotland or the US to extradite the two officials. When Libya, denying its own and the two men's involvement, declined to hand them over, the Security Council imposed sanctions in 1992, the most important of these being a ban on air links to Libya and on the sale to Libya of arms and certain oil-drilling equipment.

Seven years later, despite widespread doubts that Iran and not Libya had sanctioned the attack, Col Gaddafi finally responded with an offer to allow the two men to be extradited for trial. According to most economic analysts, it was on the back of this gesture in 1999 that the race to trade with Col Gaddafi actually started.

As a result of the handover of the two Lockerbie suspects, British Airways swiftly announced it would launch scheduled flights to Tripoli in order to exploit the "huge" business and tourist potential, ending Libya's exile from the international aviation community. At the same time, eager to capitalise on US's continued sanctions against the oil-rich state, both France and Italy re-established diplomatic and trading ties with Tripoli. According to George Joffe, the deputy director of the Royal Institute of International Affairs in London, the speed of certain European nations to move into Libya in 1999, still causes consternation amongst major US firms. He said: "The general feeling amongst US firms in 1999 was that trading relations with Libya were resumed with undignified haste. The big US oil companies have been waiting for a very long time, gearing up for sanctions to be removed, but the Europeans have really got in there first. If US sanctions are lifted this year, major American oil firms will be looking to re-develop their old fields, and fast."

But many British and American oil companies may be reluctant to deal with the erratic dictator. BP has bad memories of Libya: Col Gaddafi nationalised its assets there in 1971, throwing it and other foreign investors such as Esso and Shell, out of the country. The expulsion of BP was the start of Col Gaddafi's cultural revolution, characterised by government based on a brand of socialist Islamic fundamentalism, the suppression of dissidents at home and abroad and rejection of communism, although this did not prevent Col Gaddafi's purchase of Soviet MiG fighter planes and other defence materials from the Soviet bloc.

According to Kenneth Katzman, a Middle East expert based in Washington and author of a Congressional Research Service report on Libya, many Americans continue to oppose restoration of trade with Tripoli, he said: "Libya remains a one-man regime; he makes the decisions. If he can decide to bomb an airplane one day, what is to prevent him from doing it the next day, or in five years or ten years? A murderer in the US can't be absolved just by saying, ‘I am sorry'."

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