IOL - 16/5/2006
Washington - American oil companies stand to gain in competing for access to oil reserves in Libya by the restoration of normal diplomatic relations and the removal of Muammar Gaddafi's regime from a US list of terrorism sponsors.
The diplomacy that led to the renewal of ties with the north African country, which were severed in 1980, could also serve as an example to Iran, Bush administration officials say.
"It could be a model," Assistant Secretary of State David Welch said Monday, citing Libya's decision, under the weight of sanctions, to abandon its nuclear and other weapons programs.
American oil companies were banned from operating in Libya for 18 years -until US President George
Bush in 2004 lifted most restrictions on doing business in Libya.
This freed companies with oil and gas leases to go back to work and compete with European companies.
But Peter Lichtenbaum, who oversaw trade controls until February as assistant secretary of commerce, said the actions taken on Monday by the Bush administration will remove the need for licences for some equipment.
Assuming Congress does not disapprove of Libya's removal from the State Department's terror list in the 45 days allowed for review, "the oil companies will send whatever they want to send for their operations," Lichtenbaum, an international lawyer with Steptoe and Johnson in Washington, said in an interview.
Another control being lifted, he said, was one imposed by energy legislation enacted last summer. It barred shipment abroad of devices that could be part of a nuclear programme that companies like Halliburton normally use to explore for oil.
"That potentially was going to shut down US companies' ability to explore for oil," he said.
Libya produces about 1,6 million barrels of oil a day. Four big American companies, Occidental Petroleum, ConoccoPhillips, Marathon Oil and Amerada Hess, for about 20 years have held leases on Libyan oil and gas reserves.
David Mack, a US political officer in Libya during and after its 1969 revolution, said the amount of oil Libya is going to provide for America was not going to make a big difference. "But it will be important for a few companies that do business there."
Mack, in an interview, said American oil companies are never going to dominate Libya's oil industry again; the competition from Europe is too strong.
But, he said sales of civilian aircraft without a special license now will proceed and Libya could be a pretty good market for them.
Welch, at a State Department news conference, said the decision to remove Libya from the terrorism list was not based on the quest for oil.
"This decision is undertaken because they have addressed our national security concerns," he said.
That contrasts with Iran, which is accused by the administration and its European allies of hiding a nuclear weapons program. Iran says it is only trying to develop nuclear energy.
The Bush administration has kept its distance from negotiations with Iran, declining to join now-stalled talks between Iran and the European Union. There is virtually no US trade with Iran. Diplomatic relations have been in suspension since 1979.
Currently, the administration is seeking ways to impose economic sanctions on Iran, either through the UN Security Council or through actions by individual countries.
Whether Iran decides to follow the model set by Libya is up to Iran, Welch said.
"It's up to other nations how they look at that as a model," he said.
Mack said the United States was persuaded by Britain to talk to Libya "and it was worth it".
"It shows diplomacy works if it is backed up with a stick in the closet," he said. "The chances of having productive talks with Iran is greatly increased by this decision."
Libya turned around after years of stiff sanctions imposed for defying international demands, Welch said. "That is a process, in my judgment, that can be emulated in other cases."
As the administration turned a page with Libya and struggled to find a way to halt what it insists is an Iranian nuclear programme, the State Department took a significant step against Venezuela, also a major oil producer.
Long at odds with the leftist government in Caracas, the department gave notice it was banning arms sales to Venezuela as well as financing for such purchases.
It declared Venezuela was not co-operating with efforts to counter terrorism. US officials said Venezuela was not being classified as a state sponsor of terrorism. But State Department spokesman Sean McCormack expressed concern about Venezuela's close relations with Iran and Cuba, both of which are classified as state sponsors of terror.