Reagan's Libyan Legacy Lingers. BUSH-QADDAFI PUZZLE

HANDLING Libya will be one of the big challenges for President-elect George Bush. Libya and the United States are trying to calm tensions created by America's downing Jan. 4 of two Libyan jets. But the legacy of the Reagan years is bitter and emotional on both sides.

``There is so much suspicion, ill will, and politics for domestic consumption on both sides that I don't think there is any prospect for sound relations while [Col. Muammar] Qaddafi is still in power,'' says Henry Schuler of the Center for Strategic and International Studies here.

Mr. Schuler's conclusion is all the more telling because early last year he had a long meeting with Colonel Qaddafi and returned saying there was a prospect for accommodation. ``Qaddafi refuses to accept that there are different rules for different countries,'' Schuler says.

``He is convinced the same standards should apply to him as he sees applied to the US, or as he believes the US applies to Israel. This is a persistent theme: `Why should the US and Israel have chemical weapons and not Libya? Why can the US exercise in the Mediterranean any time and if Libya sends planes out they get shot down?'''

Other US specialists in and out of government agree there is little prospect of Qaddafi changing his ways, despite conciliatory gestures toward the incoming US administration, such as the return of the remains of a US airman lost in the 1986 bombing of Tripoli. All of those queried say further incidents are likely - air battles, acts of terrorism, vying for influence in neighboring regions with money and arms - as long as Qaddafi is at the helm.

``There will be a reprisal for the two jets we shot down,'' says a well-placed US counter-terrorism specialist. ``We've seen him do it before, after the air attack on Tripoli, for example,'' when he is credited with staging terrorist strikes on or near the one- and two-year anniversaries of this attack. ``He'll wait and cover his tracks well, but there will be a response.''

Nor is there any sign that Qaddafi's support will diminish for hard-line Palestinian dissidents, such as Abu Nidal, who is based in Libya. Indeed, according to well-informed US and French sources, as part of the recent release of two French children held by Abu Nidal, the Libyans apparently extracted a promise from Paris to help win the freedom of Libyan prisoners of war held by Chad.

US officials claim Qaddafi is trying to fill the vacuum left by the dramatic decline in US military aid for Africa, from about $200 million five years ago to $25 million this year. The US, for example, faces the prospect of ending military aid to Sudan, while Qaddafi is sending millions of dollars in a bid to win influence. Similar competitions are under way elsewhere, including in traditionally pro-Western countries like Senegal, they add.

Mr. Bush also faces domestic emotional baggage built up since the ``Libyan hit squad'' stories of the early Reagan years. It now appears those stories were false, says Schuler and Lillian Craig Harris, a London-based scholar who studied Libya at the State Department in the early 1980s.

THE challenge for the Bush team is to craft a policy that guards against Qaddafi's behavior but leaves the door open for a post-Qaddafi relationship. ``The Libyans are the greatest victims of Qaddafi,'' Harris says. However, Harris adds, ``He will go away some day, and we'll have to deal with them.''

Schuler counsels Bush not to relax. ``We have to keep the economic and political pressure on, but not the military; that's counterproductive.''

``The dangers,'' adds a well-placed foreign affairs adviser, ``is that either we say too much and are forced to act unilaterally when we're not ready, or that we act and are poorly prepared and justified.''

One of the tough Libyan issues on Washington's plate is whether to change existing economic sanctions against Libya by allowing US oil companies to have third-country subsidiaries operate their oil concessions in Libya. The Reagan administration is considering such a move in its final days, informed officials say.

Those supporting the changes say the move would allow the US to retain a presence in Libya for the long term and avoid a situation where Qaddafi could get a windfall profit. They say the Libyan leader might nationalize the US-owned oil assets next June, when a three-year stand-by agreement between Libya and the concerned US oil companies expires, unless the sanctions are altered.

Those opposing the move say this is no time to send mixed signals. When Washington is trying to build a consensus with the Europeans and others about limiting Qaddafi's chemical-weapons ambitions, they say, such a decision would be seen as putting US commercial interests ahead of its allies' interests. This, they say, would give the Europeans an excuse to rebuff the US.

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