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Libya: A Return to the U.S. Diplomatic -- and Monetary -- Fold

4 MINS READMay 15, 2006 | 23:36 GMT
Oil fields near Tripoli, Libya.
(MAHMUD TURKIA/AFP/Getty Images)
Oil fields near Tripoli, Libya.
Summary

The United States announced May 15 that it is taking Libya off its list of state sponsors of terrorism and that full diplomatic relations will be restored between Washington and Tripoli. In addition to significantly improving business relations between Libya and the United States, this move also sends a message to the Iranians and North Koreans.

Washington announced it will restore full diplomatic relations with Tripoli after 25 years and remove Libya from its list of state sponsors of terrorism May 15. Libya will be removed from the list after a 45-day waiting period. U.S. Secretary of State Condoleezza Rice said the decision was based on Washington's "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 Sept. 11, 2001."

Rice will be traveling to Tripoli soon to meet with Libya's leader, Moammar Gadhafi. It was only a matter of time before Washington removed Libya from the terrorism list. U.S. President George W. Bush was expected to give the green light to restoring full diplomatic ties with Libya before the end of his term to boost the oil sector. Dealings between U.S. officials and oil executives resulted in a decision made at least a week ago for Washington to clear the business channel to Libya.

The decision to take Libya's name off the terrorism list will significantly ease foreign business operations in the country, as U.S. companies will now have a full legal basis for aggressively pouring their time, money and technology into Libya — something that will be expedited greatly by the restoration of a standard visa process for U.S. travelers to the North African country. This move will also open the door for Libya to purchase U.S. arms and dual-use items.

Outside of the business sphere, Washington will also likely use this opportunity to tap into Libya's intelligence network more heavily and work with Tripoli to expand its counterterrorism capabilities in Africa. Existing diplomatic tensions over the United States' inclusion of Libya on the state sponsors of terrorism list often resulted in Libyan oil contracts going to non-U.S. companies in bidding rounds. Now that this sticking point has been resolved, the flow of U.S. currency investment into Libya will increase substantially. The two biggest oil players in Libya are currently Italy's ENI and France's Total. Neither of these companies, however, has been able to substantially expand its investments in the country in the past three years, since Tripoli has very publicly supported a reintegration and return of U.S. majors Exxon Mobil Corp., Marathon Oil Corp., ConocoPhillips Co. and Amerada Hess Corp. to bring their existing oil projects in Libya up to date.

In contrast to the European oil contractors, the U.S. oil companies in Libya simply have more cash and expertise to offer the Libyans. While this announcement will be warmly greeted by U.S. oil executives who have been anxiously waiting to tap into Libya's massive oil and gas sector, the White House is also using this diplomatic maneuver to send a signal to Iran and North Korea: that they too could be on the receiving end of U.S. cash flow if certain concessions are made on their nuclear programs.

In the past, Libya embraced its branding as a rogue nation, routinely laying out the welcome mat for a variety of terrorist groups as it publicly pursued its own weapons of mass destruction (WMD) program. After weighing the economic costs and benefits of developing a WMD program, Gadhafi made the critical decision in March 2004 to abandon WMDs and comply with the Nuclear Non-Proliferation Treaty. However, it became clear that Libya hadn't completely shed its bad habits when Libyan involvement in a 2004 plot to assassinate Saudi Crown Prince (now King) Abdullah was uncovered. This significant hiccup in the normalization process likely is what prevented Washington from taking Libya off its terrorism list until now. At the very least, with this overture toward Libya, Washington can put forth the incentive for countries like Iran and North Korea to follow a similar behavioral transformation to get off the U.S. state sponsors of terrorism list and reap the financial benefits.

Washington's announcement that Libya would be removed from the list was timed to coincide with U.S. and European officials' formulating an incentive package for Iran to halt its nuclear activities. While Washington is still figuring out how exactly to go about dealing with Tehran in the public sphere, it can show that there are still alternatives to the status quo in the nuclear controversy and set a precedent for Iran to be removed from the terrorism list. Given its current global player ambitions, however, Tehran is unlikely to follow Tripoli's path, despite the lure of a few billion dollars of investment.

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