With US oil companies out of Libya, will allies join embargo? Western Europe, Japan can no longer resist on grounds that US companies still operate in Libya
Washington — The last vestiges of American presence in Libya will be officially gone after June 30, when the five remaining US oil companies are due to stop operating there. In the short run, the move is unlikely to make much difference to the already struggling Libyan economy, Libya experts say. The Libyans are capable of extracting the oil without American help, and they can continue to use the oil-pumping facilities, whether the United States likes it or not.
But the pullout has a symbolic impact: It means that US allies can no longer resist American pressure for a trade embargo on Libya on the grounds that US companies still operate there.
When President Reagan, trying to isolate Libya for its terrorist activities, announced the trade embargo last January, he hoped Western Europe and Japan would follow suit. But these countries -- active importers of Libyan oil -- balked, noting that five US companies still operated there.
Western Europe still might not impose sanctions, Libya watchers say, but not on the grounds of US firms in Libya.
``The US presence gave Libya a certain respectability and creditworthiness that won't be there after June 30,'' says Libya expert G. Henry M. Schuler.
On Feb. 1, the US companies were granted a special license that would give them until June 30 to sell their assets to Libya, rather than force the US companies to accept bargain-basement prices or get nothing at all by just leaving the country. The windfall to Libya would have been more than $1 billion, the Treasury Department estimated. Later the administration announced that the companies would have to stop operating on June 30.
Even today, the companies still have not sold their drilling rights and equipment back to Libya and are under little pressure to do so. They may continue to negotiate with Libya past the June 30 deadline. Conoco spokesman David Moffitt says that negotiations have been ``inconclusive.''
Moreover, Libya can continue to use the oil-producing facilities to pump out oil. And one analyst notes that as long as the companies still have title to their assets, they're not likely to rock the boat, in the hope that things will eventually settle down and they can resume production.
However, the American stance could make it more palatable for Western Europe and Japan to think about an embargo. That's especially true during a world oil glut.
The US embargo has done little harm to Libya, because US trade with that country was negligible.
But a European and Japanese embargo could do some real harm to Libya, analysts say. Libya imports almost all of its consumer goods and equipment, (including oil-producing equipment) from the outside. In 1984, Europe and Japan bought about $7.7 billion in Libyan oil exports, or about 70 percent of Libya's total exports, according to the International Monetary Fund. Libya then used that hard currency to buy almost three-fourths of its total imports from those same countries.
Earlier this month, Libyan leader Col. Muammar Qaddafi indicated Libya could tough out a European embargo and return to austere self-sufficiency.
``But he's taking a chance,'' notes a State Department official: The Libyan people, already living under austere conditions, may not think further belt-tightening is such a great idea.
For a year now, Libyans have had to cut way back on what they could import, while the country tried to boost its foreign reserves. The drop in oil prices, which has made a large dent in Libya's oil revenues, compounded the problem.
But Fariborz Ghadar, director of George Washington University's international business program, doubts the US action will be the straw that breaks the Libyan economy -- or Qaddafi's regime. The economy ``has already been crippled'' by falling oil prices and industrial problems, he says. Moreover, he notes that the Libyans could always get around a trade embargo by finding a middleman or two to cover up where the oil originated.