As oil cash fades, Libya opens up

"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."

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