As oil cash fades, Libya opens up

For the past two weeks the streets of Libya's capital have been strung with banners celebrating the 34th anniversary of the Sept. 1 coup that brought Col. Muammar Qaddafi to power.

"Congratulations on 34 years and here's to another 34," reads a banner in Green Square - the concrete expanse where crowds gather to hear Colonel Qaddafi's famous hours-long speeches.

Images of The Leader of the Revolution, as Qaddafi prefers to be known, hang from the graceful whitewashed buildings that are a legacy of Italy's colonial rule. On some banners, he appears young and dashing. In others, defiant, fist raised.

Qaddafi has not forgotten his revolutionary ways.

But after more than a decade in international isolation, the man Ronald Reagan called a "mad dog" is preparing for a revolution of a different kind.

Winning back international respectability and getting the United Nations to end sanctions - which could come Friday after several false starts - are not isolated goals.

They are the key steps in a wider Libyan strategy to modernize and diversify the economy - now dependent on a faltering oil sector - and reintegrate it into the global market. Central to the plan is the privatization of government-owned institutions.

It is a groundbreaking step for Libya's leader. His Green Book - the slender volume on which the country's government is based - advocates a mixture of socialist principles and Arab nationalism.

But in a speech to mark Revolution Day, Qaddafi spoke of "a new page" in Libya's relations with the west.

Miloud El Mehadbi, a professor of international relations at the World Center for the Study and Research of the Green Book in Tripoli, sums up the new direction: "We have dropped the dogma and embraced pragmatism," he says.

Libya's offer of several billion dollars to compensate the families of the victims of the 1989 airline bombings over Lockerbie and Niger - in exchange for ending its pariah status - is not seen here as an admission of guilt. It is viewed by most Libyans as necessary in the face of growing US antagonism towards regimes it views as hostile.

As a result there is no celebratory mood on the city's streets, where shoppers browse stores stocked with Italian fashions and the latest Sony digital cameras.

The pain of sanctions ended in 1999, when the UN embargo was partially lifted in response to Libya's handing over of two suspects in the bombing of Pan Am flight 103 over Lockerbie in Scotland.

"Libya is a rich country and we can afford it," says Reem Terhouni, an office worker. "The money is nothing to us but we hope it will help us to make Libya the gateway to Africa."

Libya has made "a realistic choice," says Almrghni Jhomma Nagi, editor of Ash Shams newspaper. "We are paying the money to buy ourselves peace."

Although the choice was made long before the war in Iraq, the toppling of Saddam Hussein and criticism of neighboring regimes, including Syria and Iran, has deepened a view among some that peacemaking with the West can not be delayed.

"The picture is very gloomy," says Yousef Sawani, a British-trained professor of political science. "Unless you give in to the US and its interests.... Well, consider Iraq."

Asked if that means Tripoli has given in to Washington, Professor Sawani casts his eyes downward before answering: "Yes. It boils down [to the fact] that the US has won," he says. "But we believe Libya has also won. We are paying this money in order to leave behind the insults and the hostile acts. It is for the sake of a fresh start."

Qaddafi's long rule has been marked by his willingness to reinvent himself.

When the choice to promote pan-Arabism and fund radical Arab factions in the 1970s led to Lockerbie, he turned to Africa. In 1999 he announced the formation of the African Union.

But Africa's war- and poverty-stricken nations have proven to be costly allies. Continuing to fund them through a succession of crises and failed projects is too expensive even for Libya, whose 6 million citizens enjoy the highest standard of living on the African continent.

Years of sanctions imposed by the US, and then the UN, are biting. In the face of a stagnating oil sector - down from 3.7 million barrels a day in the 1970s to 1.3 million now - rapidly growing population, and rising unemployment, Qaddafi has acted boldly in authorizing wide-ranging reforms.

With the help of newly appointed Prime Minister Shukri Ghanem - an economist - Qaddafi announced in June a plan to privatize the economy and promote foreign direct investment. The exchange rate was freed, trade licenses were abolished to allow integration with the global market and the country has applied to join the World Trade Organization.

The goal is to make Libya a more attractive place for foreign companies to do business.

Mr. Ghanem, a savvy politician and fluent English speaker, admits the old ways are failing. "While it was possible to achieve good rates of growth [in the past] ... the public sector can prove to be sluggish, even corrupt," he says. "And so we had to revise our policies."

To achieve its goals, Libya needs more Western investment. Although it has traded with most of the world freely since 1999, the lifting of sanctions will remove an important psychological barrier.

"We could never be sure if sanctions would be reimposed, and that made us think twice about how much we invested," says a foreign oil worker who asked for anonymity.

Ending UN sanctions may increase pressure on the US to end its own embargo. With European oil companies lining up to do business, there is not much time: US leases on Libyan oil fields expire in 2005. A Western diplomat says, "The UK is going full steam ahead on Libya and the plane came down on their territory," he says. "I can't see the US holding out for too long."

As ever, Ghanem is pragmatic: "You have 100 knots and you can't open them all at the same time," he says. "This is the beginning."