Libya's Reintegration into the International Community

=Lifting of Sanctions=

The UN sanctions imposed in 1988 following the Lockerbie bombing, banning air traffic and arms sales, were suspended in 1999 when Libya handed over two suspects for trial in The Hague. Compensation was one of the UN's conditions for dropping sanctions altogether, plus a renunciation of terrorism and Libya's acceptance of responsibility for the Lockerbie attack. By the end of 2003, the remaining UN requirements had been fulfilled and in 2004, the UN lifted all sanctions against Libya. In 2003, Washington stated that it would not oppose the lifting of UN sanctions, but maintained its own.

Libyan-US rapprochement unfolded gradually from 2003 onwards, when the Libyan government announced its decision to eliminate its weapons of mass destruction and long range missile programs. In response, US sanctions were gradually removed. On the 31 May 2006 full diplomatic relations were restored between the two countries and in June the US removed Libya from its list of state sponsors of terrorism.

Under the new agreements, the Libyans agreed to pay $2.7 billion, or $10 million per family, in compensation to the families of the 270 victims killed in Lockerbie in 1988. Each of the families were to receive the first sum of $4m when the UN lifted sanctions, an additional $4m when the US lifted trade sanctions and another $2m when Libya was removed from the State Department's list of State Sponsors of Terrorism. In November 2008, the families of the victims announced that compensation had been paid in full by the Libyan government.

=US Oil Companies Return to Libya=

In 2005, US oil companies began to flood back to Libya and resume oil and gas operations following a 19-year absence. Among them were ConocoPhillips, Marathon Oil and Amerada Hess (collectively making up the Oasis Group consortium), who had their exploration contracts suspended in the late 1980s following the imposition of unilateral sanctions. The Oasis Group paid $1.3 billion to resume operations and the terms of their 25-year deal were similar to those in force before contracts were suspended. In February 2005 the US Department of Energy announced that Libya was ready to become a major oil exporter again, especially to Europe.

US companies returning adopted a number of strategies, from buying back old concessions (Marathon and ConocoPhillips), to winning bids for new blocs (Chevron and ExxonMobil), or a combination of both (Amerada Hess and Oxy). Libyan oil production saw a steady increase following the lifting of sanctions, however with this inflow of capital and the return of the international oil companies (IOCs) there were reports of growing evidence of Libyan resource nationalism. Evidence included the renegotiation of contract terms by Libya's National Oil Corporation (NOC) and the adoption of Libyan names for IOCs with local subsidiaries. In early September 2008, US Secretary of State Condoleeza Rice made an official visit to Libya, a visit which was seen as symbolic of the country's full reintegration into the international community.

However, a further obstacle to US-Libya was encountered when in 2009 the Libyan NOC convoked the IOCs in Libya to present a new law establishing a fund for charitable contributions. While the stated purpose of the law was to gather contributions for charitable programs, NOC officials conceded to US Embassy officials in a leaked diplomatic cable that the new law was the government's latest attempt to prompt IOCs to make 'voluntary' contributions to the fund established under the US-Libya Comprehensive Claims Compensation Agreement, which exists to compensate victims of terrorism and their families. Citing concerns about potential violations of the Foreign Corrupt Practices Act, IOC heads were reluctant to make contributions.

=The al-Megrahi Question=

One question which continued to haunt relations between Gaddhafi's Libya and Western countries concerned the release of release from a British prison of Abdelbaset al-Megrahi, the only person convicted of the bombing of Pan Am flight 103 in 1988 in Lockerbie. In 2001 al-Megrahi was sentenced to life imprisonment in Scottish courts, yet in 2009 was released on 'compassionate grounds' by the Scottish government, as he was thought to be close to death from cancer (although he remained alive until his death in Tripoli in May 2012). Accusations were made that British oil major BP had played a role in securing the Libyan's release, however BP denies any lobbying that linked Libyan prisoners to commercial contracts.

Following the events of 2011, the National Transitional Council (NTC) in Libya assured that it would provide any assistance requested for investigations into the Lockerbie case. However, the interim Minister of Justice later stated in 2011 that he considered this case 'closed'.

=Fresh Sanctions in 2011=

The progress of Libyan international reintegration came to a halt with the civil unrest which broke out in the country in spring 2011, leading to the eventual overthrow of Muammar Gaddafi. Following the uprising, the international community moved to impose a new round of sanctions on the regime. After reports from Tripoli that anti-government protests had come under heavy gunfire, US President Obama signed an executive order freezing the assets of Colonel Gaddafi and members of his immediate family, a move aimed at pressuring Libya to stop violently repressing the popular protests. The sanctions covered Libyan state-owned oil companies including the Arabian Gulf Oil Company, Harouge Oil Operations, Sirte Oil Company, Zuetina Oil Company and Waha Oil Company. International oil companies such as ExxonMobil and banking company JP Morgan reported compliance with US and UN sanctions imposed on Libya.

On 16 September 2011 the UN Security Council dropped sanctions on two Libyan oil companies (Zuetina and the National Oil Corporation) and eased restrictions on four banks in a move to boost the nation’s recovery from the war that toppled the dictator. This paved the way for IOCs such as Eni and Total to begin resumption of some spheres of operations in the country. In December 2012 the US, in coordination with the United National Security Council, unfroze the assets of the Libyan Central Bank and the Libyan Foreign Bank to allow the Libyan government to access its worldwide holdings. Assets held by the Gaddafi family remained frozen, as did the assets of the Libyan Investment Authority (LIA) and the entities it controls.

=References=