1. Country Report
Libya
Libya at a glance: 2006-07
OVERVIEW
Muammar Qadhafi’s position as head of state will be unchallenged, supported
by his family and trusted aides. Economic reform, of which privatisation is
claimed to be a central thread, will provide the focus of government policy,
although there will be little change in the political environment. The reform
process will be geared towards strengthening global economic ties and
attracting more foreign direct investment, both of which have gained
momentum since the lifting of US sanctions. Nevertheless, progress will be
slow, constrained by bureaucracy and policy reversals. A two-speed reform
process is likely to emerge, with the government prioritising the development
of the hydrocarbons sector above other areas of the economy. Economic
growth will remain strong and inflation, though rising, will stay low.
Key changes from last month
Political outlook
• The political outlook is unchanged. Colonel Qadhafi will pursue his
objective of greater international acceptance. With the lifting of US and EU
sanctions, Libya’s political rehabilitation is almost complete, although the US
has kept Libya on its list of “state sponsors of terrorism”.
Economic policy outlook
• The economic policy outlook has improved on the back of an upward
revision to the Economist Intelligence Unit’s oil price forecast. Nevertheless,
the fiscal surplus will still fall in 2006, contracting more sharply in 2007,
although it will remain healthy at 5% of GDP. The government’s primary
policy objective will remain focused on attracting foreign investment into all
areas of the economy, and in particular the oil sector.
Economic forecast
• Libya’s economic outlook has improved owing to the upward revision to
our oil price projection. Real GDP growth will average almost 8% over the
forecast period, and, after expanding rapidly in 2005, the current-account
surplus will narrow in both years of the forecast period, closing at around
5.5% of GDP.
October 2005
The Economist Intelligence Unit
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United Kingdom

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3. Libya 1
Contents
Libya
3 Summary
4 Political structure
5 Economic structure
5 Annual indicators
6 Quarterly indicators
7 Outlook for 2006-07
7 Political outlook
8 Economic policy outlook
10 Economic forecast
12 The political scene
21 Economic policy
24 The domestic economy
24 Oil and gas
30 Infrastructure
31 Foreign trade and payments
List of tables
10 International assumptions summary
12 Forecast summary
23 Money supply
24 Domestic credit
32 Reserves
List of figures
12 Gross domestic product
12 Consumer price inflation
25 Oil prices
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

5. Libya 3
Libya
October 2005
Summary
Outlook for 2006-07 Muammar Qadhafi’s position as head of state will be unchallenged, supported
by his family and trusted aides. Economic reform, of which privatisation is
claimed to be a central thread, will provide the focus of government policy,
although there will be little change in the political environment. The reform
process will be geared towards strengthening global economic ties and
attracting more foreign direct investment, both of which have gained
momentum since the lifting of US sanctions. Nevertheless, progress will be
slow, constrained by bureaucracy and policy reversals. A two-speed reform
process is likely to emerge, with the government prioritising the development
of the hydrocarbons sector above other areas of the economy. Economic growth
will remain strong and inflation, though rising, will stay low.
The political scene Colonel Qadhafi celebrated 36 years in power in September, an event marred
by incidents that suggested his regime still intimidates dissidents and their
families. The Qadhafi International Charitable Foundation has continued its
efforts to shore up Libya’s human rights image and has entered into dialogue
with the overseas opposition. Tensions still exist in the cabinet, hindering
reform, although Libya has managed to make headway in its relations with the
US, opening the possibility of a high-level visit later this year.
Economic policy Libya looks set to double its fiscal surplus in 2005, although there has been little
progress in the privatisation programme. More detail has emerged concerning
the new banking law. Money supply growth has soared and domestic credit
growth remained negative.
The domestic economy Some 66 foreign companies pre-qualified for the second oil concession licensing
round, the results of which are imminent, although rumours emerged that the
licensing rules may be changed for the next round. Foreign firms are jostling for
position in the oil market, and US companies are ready to return. Phase 2 of
Western Libya Gas Project came on stream and other gas infrastructure
developments have made progress. Further contracts have been awarded for
the Great Man-made River Project as well as for waste management schemes.
Foreign trade and payments Customs tariffs have been eliminated and are likely to be replaced with a tax
on service imports. Libya’s main overseas investment agency, the state-owned
Libyan Arab Foreign Investment Company, diversified its overseas investments.
Foreign-exchange reserves have continued their strong growth.
Editors: Philip McCrum (editor); Hania Farhan (consulting editor)
Editorial closing date: September 28th 2005
All queries: Tel: (44.20) 7830 1007 E-mail: london@eiu.com
Next report: Full schedule on www.eiu.com/schedule
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

6. 4 Libya
Political structure
Official name The Great Socialist People’s Libyan Arab Jamahiriya
Form of state Since 1977 Libya has been a jamahiriya (republic of the masses) in accordance with the
Third Universal Theory propounded by Colonel Muammar Qadhafi in his Green Book,
which is a blend of socialist and Islamic theories inspired by tribal traditions. The
jamahiriya system defines the political and social order, which is also governed by the
Holy Quran. The General People’s Congress is the highest legislative body. In 1992 Colonel
Qadhafi changed the political structure by dividing Libya into 1,500 mahallat
(communes), each with its own budget and legislative and executive powers, formerly
vested in the Basic People’s Congresses. The mahallat and the congresses are supervised
by revolutionary committees directed by secretaries, who are chosen personally by
Colonel Qadhafi
Head of state Colonel Qadhafi was appointed supreme leader by the General People’s Congress in
March 1990 after taking power in a coup in 1969
Executive In 2000 Colonel Qadhafi abolished most central government executive functions,
devolving responsibilities to the 26 municipal councils that make up the General People’s
Congress. Centralised control is maintained in the areas of the economy, finance, defence
and security, energy, infrastructure, foreign affairs, social security and trade, all of which
report directly to the prime minister’s office
Legislature The General People’s Congress, delegates to which are chosen by the Basic People’s
Congresses
Key ministers Assistant secretary for services Maatuq Mohammed Maatuq
Deputy prime minister Ali Baghdadi al-Mahmudi
Economy & foreign trade Abd al-Qadir Bilkhair
Energy Fathi bin Shatwan
Finance Mohammed Ali al-Huwaiz
Foreign affairs & international
co-operation Mohammed Abderrahman Chalgam
Justice & public security Mohammed Ali al-Misurati
Planning Taher al-Hadi al-Jehaimi
Secretary of General People’s Committee
(prime minister) Shokri Ghanem
Secretariat of the General People’s Assistant secretary Ahmed Mohammed Ibrahim
Congress Foreign affairs Suleiman Sasi al-Shahumi
Head of Higher Planning Council Abdel-Hafez Zleitni
Popular Committees Ibrahim ali Ibrahim
Popular Congresses Ibrahim abd al-Rahman Abjad
Secretary (speaker) Zenati Mohammed Zenati
Social affairs Amal Nuri Abdullah Safar
Tourism Umar al-Mabruk al-Tayyif
Trades unions, federations
& vocational associations Mohammed Jibril al-Urfi
National Oil Corporation
chairman Abdullah Salem al-Badri
Central Bank governor Ahmed Munaisi Abdel-Hamid
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

7. Libya 5
Economic structure
Annual indicators
2001a 2002a 2003a 2004b 2005b
GDP at market prices (LD bn) 17.2 24.3 29.4b 34.0 47.9
GDP (US$ bn) 28.4 19.1 22.7b 26.0 36.8
Real GDP growth (%) 3.4b 3.2b 9.1b 9.3 8.5
Consumer price inflation (av; %) -8.8 -9.8 -2.1 -3.4 -1.0
Population (m) 5.4 5.5 5.6 5.7 5.9
Exports of goods fob (US$ m) 10,985.0 9,851.0 14,664.0 19,062.0 30,792.8
Imports of goods fob (US$ m) 4,825.0 7,408.0 7,200.0 8,590.0 10,823.4
Current-account balance (US$ m) 3,683.0 122.0 3,642.0 5,647.0 14,440.8
Foreign-exchange reserves excl gold (US$ m) 14,800.5 14,307.4 19,584.0 25,688.8a 32,111.3
Total external debt (US$ bn) 4.5b 4.4b 4.2b 4.1 4.3
Debt-service ratio, paid (%) 6.6b 6.8b 4.7b 4.0 3.0
Exchange rate (av) LD:US$ 0.605 1.271 1.293 1.305a 1.300
a Actual. b Economist Intelligence Unit estimates.
Origins of gross domestic product 2003 % of total Components of gross domestic product 2001 % of total
Agriculture, forestry & fishing 8.4 Private consumption 53.8
Oil and gas 32.6 Government consumption 24.2
Mining 1.8 Gross fixed capital formation 17.1
Manufacturing 4.2 Change in stocks 0.2
Construction 2.0 Exports of goods & services 23.3
Services 44.5 Imports of goods & services 18.7
Main destinations of exports 2004 % of total Main origins of imports cif 2004 % of total
Italy 37.1 Italy 27.2
Germany 16.3 Germany 10.8
Spain 11.9 Tunisia 6.6
Turkey 7.2 UK 5.6
France 6.3 Turkey 4.9
Switzerland 3.5 France 4.0
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

8. 6 Libya
Quarterly indicators
2003 2004 2005
3 Qtr 4 Qtr 1 Qtr 2 Qtr 3 Qtr 4 Qtr 1 Qtr 2 Qtr
Financial indicators
Exchange rate LD:US$ (end-period) 1.36 1.30 1.31 1.32 1.32 1.24 1.28 1.33
Deposit rate (av; %) 3.0 3.0 2.3 2.0 2.0 2.0 2.0 n/a
Lending rate (av; %) 7.0 7.0 6.3 6.0 6.0 6.0 6.0 n/a
Money market rate (av; %) 4.0 4.0 4.0 4.0 4.0 4.0 4.0 n/a
M1 (end-period; LD m) 8,152 8,341 8,683 9,539 9,638 10,154 10,688 n/a
M1 (% change, year on year) 6.4 6.3 11.0 22.2 18.2 21.7 23.1 n/a
M2 (end-period; LD m) 10,555 10,819 11,233 12,020 12,000 12,753 13,530 n/a
M2 (% change, year on year) 6.8 7.8 13.8 22.7 13.7 17.9 20.4 n/a
Sectoral trends
Crude oil production (m barrels/day) 1.43 1.46 1.47 1.51 1.59 1.61 1.61 1.65
Crude oil production (% change, year on year) 7.1 8.7 5.5 5.6 11.4 10.5 9.5 9.3
Foreign trade & reserves (US$ m)
Exports fob a 3,522 3,650 4,017 4,159 5,176 5,962 5,448 n/a
Imports fobb -1,467 -1,569 -1,780 -1,963 -2,271 -2,107 -1,991 n/a
Trade balance 2,055 2,081 2,237 2,196 2,905 3,855 3,456 n/a
Reserves excl gold (end–period) 17,587 19,584 20,674 21,371 22,798 25,689 27,731 30,596
a DOTS estimates. b DOTS estimates; cif data do not include defence imports.
Sources: IEA, Monthly Oil Market Report; IMF, International Financial Statistics; Direction of Trade Statistics.
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

9. Libya 7
Outlook for 2006-07
Political outlook
Domestic politics There is little risk of substantial change in the domestic political environment
in 2006-07. Following staggered cabinet reshuffles during 2003 and early 2004,
economic reform remains—at least ostensibly—at the top of the government
agenda, championed by the prime minister, Shokri Ghanem. His authority,
though tempered by the retention of some of the old guard within the cabinet,
is buoyed by the presence of reformists in key ministerial roles. This tug-of-war
will ensure that the process will be characterised more by word than by deed,
although progress, as evinced by recent moves to lift subsidies and customs
tariffs, will be perceptible. More rapid development is likely to be hindered by
policy reversals (the Libyan leader, Muammar Qadhafi, is notoriously fickle)
and by bureaucratic bottlenecks.
Whatever the extent and pace of economic reform, it will not be accompanied
by political liberalisation. Colonel Qadhafi is highly unlikely to introduce any
reforms that would compromise his hold on power; instead, any changes that
do occur will be calculated to consolidate further his own authority. To this
end, random portfolio reshuffles will be so designed as to deny any
individual minister the opportunity to build up a personal power base, as well
as to balance the competing power structures within the political hierarchy.
Policy formulation and implementation will remain subordinate to this
overarching goal.
General domestic dissent will remain at low levels, although the exiled
opposition looks likely to grow more voluble. Internal threats to the regime—
such as those posed by Islamists in the 1990s—should they emerge, will have to
contend with a pervasive security apparatus and are unlikely to prove a danger.
However, should the socioeconomic environment deteriorate, precipitated
perhaps by reforms that could exacerbate unemployment (such as privatisation),
or by a collapse in oil prices, or even by a sense amongst ordinary Libyans that
they are not getting a share of the spoils from the lifting of sanctions, the
government may be faced with spontaneous outbreaks of unrest, which could
threaten to blow up into a more focused campaign.
Although there are no signs of an imminent handover of power, the Libyan
leader appears to be preparing his children to play important roles in the
running of the country, with the possibility that one of them—most probably Saif
al-Islam Qadhafi—will eventually succeed him. However, with no formal
mechanism in place to ensure a smooth transition of power, whether this comes
to pass remains moot. Indeed, it is highly likely that the immediate post-Qadhafi
era will be characterised by political tension and uncertainty, with various
sociopolitical forces vying for power.
International relations The government will attempt to consolidate its rehabilitation within the inter-
national community, which, with the removal of remaining US and EU
sanctions—including the EU arms ban—on Libya towards the end of last year, is
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

10. 8 Libya
now well-established. Tripoli has hosted most of Europe’s senior leaders and is
frequently visited by key US politicians, further cementing Libya’s diplomatic
and political gains.
With the country’s international relations much improved, Libya will seek to
reap the greatest economic benefit from its new status. Commercial interest in
Libya—notably in its hydrocarbons industry—has grown, as evidenced by strong
recent competition for a number of oil exploration and production contracts on
offer by Libya’s National Oil Corporation. Such activity gives a future indication
of the dynamics of Libya’s international relations, which will be primarily
conducted in the economic, rather than the political, arena.
Notwithstanding this, Colonel Qadhafi will persist in attempts to play a more
high-profile role on the global political stage, although these efforts will amount
to little more than rhetoric. This will be especially evident within Sub-Saharan
Africa, where Libya will continue to be active, seeking to gain influence through
financial and material beneficence. Its continued efforts to mediate over the
crisis in Darfur exemplify this. However, Colonel Qadhafi’s Africa policy is
unlikely to secure much reward, and will continue to be a point of contention
with the larger Sub-Saharan states, such as Nigeria and South Africa, which do
not look kindly on attempts to undermine their own authority in the region.
The US will also remain concerned about Libya’s intentions in Africa, given its
meddlesome reputation in the past.
Relations with Arab countries will continue to be strained. Tensions with Saudi
Arabia over an alleged Libyan-backed plot in 2004 to assassinate the then
crown prince (now king), Abdullah bin Abdel-Aziz al-Saud, led to the two
countries’ respective ambassadors being recalled. The situation has been
calmed following Saudi Arabia’s pardoning of the alleged Libyan plotters,
although relations still remain fragile. Further occasional bilateral disputes with
other Arab states are likely. However, the risk of Libya’s total estrangement from
its Arab partners is negligible, as Colonel Qadhafi is unlikely to alienate himself
completely from his regional neighbours while he attempts to establish a
position for himself on the wider political stage.
Economic policy outlook
Policy trends The government consistently states that it is committed to a course of economic
liberalisation and reform in a drive to attract greater levels of foreign investment
into Libya. However, progress in most areas of the economy will continue to be
tentative and subject to periodic reversals, as recently shown by Colonel
Qadhafi’s reported decision to renounce plans to develop a nationwide rail
network in favour of upgrading the road system. In particular, the government’s
much-trumpeted privatisation programme has gained little momentum,
although recent moves to ease subsidies and lift customs tariffs demonstrate
that the reform agenda is ticking over. A major obstacle in assessing the govern-
ment’s attempts at reform is its lack of transparency and communication; more
often than not measures undertaken are only publicised at the last minute, or
indeed after the event, with details inevitably scant.
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

11. Libya 9
Nevertheless, the government appears committed to fast-track development in
the hydrocarbons industry—from where the vast majority of its revenue
accrues—in order to meet the official objective of raising oil production capacity
to 3m barrels/day by 2015. This can only be achieved with considerable levels
of foreign direct investment, with official estimates suggesting that the industry
needs to attract US$30bn by 2010 in order to meet its development plans. The
recent award of oil exploration and production contracts—with promises of
more to come—are evidence of the government’s focus, although its pre-
occupation with the hydrocarbons sector could entail the emergence of a two-
speed reform process, resulting in a two-tier economy.
Fiscal policy Libya will take advantage of historically high oil prices to boost spending over
the forecast period, although the rate of expenditure growth is likely to slow. In
2006 capital spending is expected to expand by over 40% to LD10bn
(US$13.2bn), as more development projects come on line with Libya looking to
upgrade its dilapidated infrastructure. Recurrent expenditure will likewise
increase, but by a smaller margin of 11% to LD13.6bn, as the easing of subsidies
creates savings, despite the raising of salaries to compensate. This will lift total
expenditure by 17% to LD23.6bn. Revenue will grow much more slowly,
however. Oil receipts will rise by 1.7%, as an increase in oil production offsets a
decline in prices, and total revenue will expand by 3% to LD33.9bn.
Spending growth in 2007 will slow further as the government attempts to rein
in expenditure in response to an expected drop in oil revenue. However, with
its development programme gathering momentum and its wage bill remaining
stubbornly high, the government’s success will be limited. Total expenditure is
therefore expected to rise by 13% to LD26.7bn. Oil revenue is projected to drop
by 17% as oil prices, too, fall by 17%, although receipts will still be almost double
those recorded in 2000. Despite the rise in non-oil earnings over the forecast
period, in 2007 the fall in oil prices will negate these gains and total revenue
is expected to decline by some 14% to LD29.3bn. Overall, the budget surplus
will contract to LD10.3bn (19.3% of GDP) in 2006, before narrowing more
sharply in 2007 to LD2.6bn—equivalent to a still-healthy 5% of GDP.
Monetary policy Libya does not employ a particularly active monetary policy as part of its
macroeconomic management. In March 2004 the discount rate was lowered to
4% from 5%—the first time it had been altered since 1998—illustrating efforts by
the Central Bank of Libya to loosen the monetary environment. The interest
rate shift was in line with recommendations advanced in the IMF’s 2004
Article IV report, which encouraged a more positive monetary stance by
introducing a wider range of market-based instruments (such as Treasury bills).
Libya has not made any further adjustments to its interest rates since then, and
the authorities are unlikely to move quickly to adopt any other monetary
measures, which means there will be little change in monetary policy over
the forecast period.
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

12. 10 Libya
Economic forecast
International assumptions International assumptions summary
(% unless otherwise indicated)
2004 2005 2006 2007
Real GDP growth
World 5.1 4.3 4.0 4.0
OECD 3.3 2.4 2.3 2.4
EU25 2.4 1.6 1.9 2.2
Exchange rates
US$ effective (1995=100) 86.0 84.1 82.0 79.5
US$:€ 1.244 1.257 1.293 1.343
¥:US$ 108.1 107.8 103.0 96.3
Financial indicators
US$ 3-month commercial paper rate 1.48 3.46 4.79 5.00
€ 3-month interbank rate 2.13 2.08 2.00 2.88
Commodity prices
Oil (Brent; US$/b) 38.5 57.0 56.3 46.8
Gold (US$/troy oz) 409.5 430.1 410.0 370.0
Food, feedstuffs & beverages (% change in US$
terms) 8.6 -0.6 1.1 0.6
Industrial raw materials (% change in US$ terms) 21.0 5.8 -6.3 -8.8
Note. Regional GDP growth rates weighted using purchasing power parity exchange rates.
After several years of strong expansion, the global economy is likely to be
characterised by a gradual deceleration in output and demand growth over the
forecast period, driven in particular by more sluggish economic activity in the
key economies of the US and Japan. We expect world GDP growth (on a
purchasing power parity basis) in 2006 and 2007 to slow to 4%, down from
4.3% this year.
Despite the slowdown in global growth, energy demand will remain strong,
forcing a further upward revision to our oil price forecast in 2006. The
benchmark dated Brent Blend is now projected to average US$56.3/barrel in
2006, down from an estimated record of US$57/b in 2005, before declining
markedly to US$46.8/b in 2007 as supply bottlenecks are circumvented and
sociopolitical tensions in key oil producing regions ease. Nevertheless, the
average of US$52/b over the two-year period is more than US$27/b higher than
the average over the previous ten years.
Economic growth Real GDP growth is expected slow slightly, to 8.1%, in 2006, from 8.5% in 2005,
as domestic demand is weakened by more sluggish activity in the oil sector.
Nonetheless, high rates of investment growth, which will be sustained by
continuing commercial interest from abroad, will help buoy growth. Despite a
contraction in oil revenue in 2007, domestic confidence will be maintained,
with both government and private consumption remaining strong, although
slowing. Libya’s development programme will continue to attract the attentions
of overseas investors, but will also demand continued high volumes of
imported industrial inputs, and as a result real growth will ease again slightly, to
a still-high 7.6%.
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

13. Libya 11
Inflation Following expected deflation of around 1% in 2005, we project that consumer
prices will increase by an average of 1.8%, the first price rise in seven years. The
increase will come on the back of the government’s easing of subsidies,
although it is difficult to gauge the extent of any rise, owing to the many rigid
price controls likely to remain in place.
The relative stability of the Libyan dinar should offset some of the inflationary
impact of higher import costs, although strong domestic liquidity (as
demonstrated by sharp increases in money supply growth) will add to price
pressures and we envisage that consumer price inflation will accelerate slightly
in 2007, to 2.2%.
Exchange rates The Libyan dinar is pegged to the IMF’s special drawing rights (SDRs), and is
managed through tight official controls. The country’s ample foreign reserves—
US$30.6bn (an estimated 32 months of import cover) at end-May 2005—will
help sustain this policy and ensure the continuation of a stable exchange-rate
regime over the forecast period and beyond. The SDR is projected to strengthen
against the US dollar over the forecast period; consequently, the dinar will track
these movements, averaging around LD1.31:US$1 in 2006 and LD1.29:US$1 in
2007. In late September 2005 the dinar was trading at LD1.32:US$1.
External sector Owing to falling oil prices and growing domestic oil consumption, Libya’s
export receipts will stay virtually static in 2006, supported only by a slight rise
in output. Total export revenue should therefore reach US$31bn. However, in
2007 export earnings will show a significant drop of around 15%, as oil prices
are projected to fall by some 17%, reducing overall revenue to US$26.4bn. With
expectations that government expenditure on development projects will
continue to rise, import spending will increase, and we forecast that the import
bill will surge by 22% in 2006, to US$13.2bn. In 2007 spending will continue to
increase firmly, as domestic demand and development work on capital projects
remain strong. The import bill is therefore expected to rise by a further 24%, to
US$16.4bn. Overall, the trade surplus will contract by over 10% in 2006, to
US$17.8bn, before tumbling by over 40% in 2007, to close the forecast period
at US$10bn.
The services and income balances will continue to run a combined deficit,
however, as services costs associated with imports grow and foreign oil firms
repatriate higher levels of profits. Additionally, Libya’s debt servicing will
become more expensive in line with the rise in US and global interest rates.
The current transfers account will stay in deficit as Libya’s expatriate
community remains economically insignificant and the number of foreign
workers in the country rises. The growing non-merchandise deficit will not be
sufficient to significantly dent the trade surplus, however, although the current-
account surplus will nonetheless contract to US$11.4bn (a still-large 28.1% of
GDP) in 2006. It will narrow more sharply in 2007, to US$2.4bn (5.5% of GDP).
Country Report October 2005 www.eiu.com © The Economist Intelligence Unit Limited 2005

14. 12 Libya
Forecast summary
(% unless otherwise indicated)
2004a 2005 a 2006b 2007b
Real GDP growth 9.3 8.5 8.1 7.6
Oil production ('000 b/d) 1,548c 1,643 1,680 1,722
Oil exports (US$ bn) 20.0 29.6 29.8 25.3
Consumer price inflation (av) -3.4 -1.0 1.8 2.2
Consumer price inflation (year-end) -2.2 0.3 2.0 1.1
Deposit rate 2.1c 2.0 2.0 2.0
Government balance (% of GDP) 14.8 26.8 19.3 5.0
Exports of goods fob (US$ bn) 19.1 30.8 31.0 26.4
Imports of goods fob (US$ bn) 8.6 10.8 13.2 16.4
Current-account balance (US$ bn) 5.6 14.4 11.4 2.4
Current-account balance (% of GDP) 21.7 39.2 28.1 5.5
External debt (year-end; US$ bn) 4.1 4.3 4.5 4.8
Exchange rate LD:US$ (av) 1.305c 1.300 1.310 1.285
Exchange rate LD:€ (av) 1.623c 1.634 1.693 1.725
Exchange rate LD:¥100 (av) 1.207c 1.206 1.272 1.335
Exchange rate LD:SDR (av) 1.933c 1.935 1.982 1.998
a Economist Intelligence Unit estimates. b Economist Intelligence Unit forecasts. c Actual.
The political scene
Colonel Qadhafi defiantly On September 1st Libya marked the 36th anniversary of the coup—officially
celebrates 36 years in power known as the “revolution”—that brought Muammar Qadhafi to power in 1969.
The date is a fixture in Libya’s calendar and year after year is marked by stage-
managed celebrations in Green Square, in the centre of Tripoli. This year was
much the same, except that following a conference of Libyan opposition
movements in London in June the Libyan authorities appeared to make an
especial effort to give an impression of widespread popular support for Colonel
Qadhafi. Participants representing a cross-section of Libyan society were bused
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15. Libya 13
into Tripoli, and reports indicated that well over 100,000 people attended the
celebrations—an impressively large figure, even if it was far short of the 1m
claimed by the organisers.
The streets were festooned with banners congratulating Libyans and Colonel
Qadhafi, some overtly from Western companies (including at least one US oil
company), and amid fireworks, music and light displays, Colonel Qadhafi
made his usual flamboyant appearance. In a typically blunt message, during
the festivities Colonel Qadhafi was presented with a document that was
proclaimed as a “charter of fidelity” signed “by the Libyan people”. Meanwhile
a commentator on state-owned Libyan television declared that the large crowds
were “an expression of the people’s allegiance towards their guide”. Referring to
the opposition figures (or “mercenaries”) who had met in London, the
commentator asked: “what democracy are they talking about, set against this
grandiose spectacle?”
In truth, the brash spectacle of the celebrations does not reflect general public
sentiment and will have persuaded few, if any, Libyans that Colonel Qadhafi
deserves their support. Owing to Colonel Qadhafi’s pervasive security
apparatus, Libyans are still wary of criticising the leader in public, although it is
widely accepted that privately he is deeply resented. He is held culpable for
years of international isolation and economic deprivation, and many Libyans
yearn for change. However, there are enough beneficiaries of the political status
quo in Libya to ensure the continuation of orchestrated demonstrations of
support not just for Colonel Qadhafi, but also for the regime itself.
Political opposition still This prevailing undercurrent of antipathy for Colonel Qadhafi and his regime
faces dangers has never coalesced into an identifiable political movement owing to the
leader’s tough resolve to crush dissent and political opposition. His rule has
often been challenged—both intellectually and violently—only to meet with
brutal and ruthless repression. And in spite of Libya’s growing international
acceptance and the concern aired by interlocutors such as the US and the EU
over human rights abuses, little appears to have changed. Although Libyan
opposition movements and activists have become more vociferous in the past
six months—albeit from the relative safety of foreign shores—the dangers they
face have been grimly illustrated by a series of killings and arrests. In July the
85-year-old father of a Paris-based Libyan dissident, Hadi Shaluf, was murdered
in an eastern district of Tripoli. No evidence has yet emerged about who killed
him, but if it was an assassination at the behest of the Libyan authorities—as is
widely suspected—it is a disturbing reminder of how far some elements in the
government will allegedly go to deter political opposition.
The murder of Mr Shaluf came only a few months after a prominent journalist
and writer, Daif al-Ghazal, was tortured and executed in Libya (July 2005, The
political scene). Meanwhile, it has emerged that another Libyan journalist, Abd
al-Raziq al-Mansuri, has been detained without trial since January, allegedly
because he possessed a pistol without a licence. According to the US-based
Human Rights Watch, which met Mr Mansuri during a visit to Libya in May,
Mr Mansuri believes he was detained by Libya’s internal security because of
articles he wrote for a Libyan opposition website, Akhbar Libya. Mr Mansuri
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16. 14 Libya
also said that he was incarcerated for a while at an internal security department
established for combating “terrorism and zealots”.
Further uncorroborated reports intimate that relatives of dissidents involved in
an opposition conference in London in June (July 2005, The political scene)
have allegedly been intimidated by members of the security services, a tactic
that is well-rehearsed in Libya, whereby families are often denied various
public services or subsidies and are even sometimes imprisoned.
QICF has much work to do on The recent killings, and the government’s response to the activities of
human rights opposition movements abroad, highlight outstanding concerns over Libya’s
human rights record. The government has offered little more than platitudes to
address the issue, leaving the opaque but ostensibly humanitarian organisation,
the Qadhafi International Charitable Foundation (QICF), headed by Colonel
Qadhafi’s son, Saif al-Islam Qadhafi, as one of the few domestic public
advocates of note focused on improving the human rights situation in the
country (July 2005, The political scene).
Mr Qadhafi and the QICF have recently attempted to raise the profile of its
human rights operations, staging high-profile prison visits, offering prisoner
amnesties and guaranteeing the safe return of exiled Libyan dissidents. In late
August the QICF announced that the authorities would release some 130
Islamist political prisoners, most of whom were allegedly members of the
Muslim Brotherhood, and all of whom had pledged to stay out of politics. The
release was to coincide with the September 1st anniversary, when Colonel
Qadhafi usually announces a prisoner amnesty—this year some 1,675 prisoners
were released. However, most of these were reportedly serving time for only
petty crimes and had already served half their sentences, and the QICF failed
to secure the release of the hundreds of prisoners of conscience still languishing
in Libyan jails.
Separately, speaking at a launch in August of a report on the activities of the
QICF from 2000 to 2004, Mr Qadhafi indicated that the QICF had so far
helped some 787 Libyans abroad to return to Libya, 304 of whom returned after
being contacted directly by the QICF. The QICF’s efforts in this regard followed
a call by Colonel Qadhafi earlier in 2005 for Libyans living abroad to return
home, with the assurance that they should not fear persecution.
Laudable though these efforts are, they are modest in comparison with
outstanding grievances that need to be addressed, as outlined in recent reports
by both Amnesty International and Human Rights Watch. Furthermore, despite
the fanfare surrounding the QICF’s operations, Mr Qadhafi’s personal
commitment to basic human rights, such as freedom of expression, and to
democratisation remain ambiguous. Most notably, however, as long as a vibrant
civil society is denied a forum in Libya and the QICF remains the only
organisation nominally campaigning for human rights, the government’s
commitment to expanding personal liberties in Libya will remain questionable.
Libyan opposition movements The QICF’s operations are not solely devoted to human rights, however, and in
explore possibility of dialogue the past have included sending aid and material assistance overseas, such as
medical aid for Palestine, or help to build mosques in Chad. However, it is
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17. Libya 15
becoming apparent that Mr Qadhafi is beginning to use his foundation more as
a political platform, from which he can launch political initiatives. In August,
for example, he announced the outline of a proposal for political and human
rights reform, calling for measures to address a wide range of issues, including
national reconciliation with opposition groups, past human rights abuses,
political prisoners and constitutional wranglings.
The idea was welcomed by a number of opposition groups, notably the
London-based Libyan Human Development Forum (LHDF) and the Muslim
Brotherhood (although other groups such as the National Front for the
Salvation of Libya rejected it). In September the LHDF published a letter on a
number of Libyan websites calling for a “national conference for the forces of
reform” to be held, which would explore “the appropriate mechanisms” to
implement Mr Qadhafi’s proposals for reform in Libya. The letter urged
Mr Qadhafi and the QICF to organise the conference and invite Libyans from
both inside and outside Libya to attend.
It is understandable that some Libyan opposition movements should now
explore the possibility of dialogue with the Libyan government, rather than
choose the well-worn, but apparently futile, path of confrontation. Following
Libya’s international rehabilitation, and given the interest of the US in Libyan
co-operation in the “war on terror”, there is significantly less scope for Libyan
opposition movements to receive political or financial support from the US or
Europe with which to challenge the Libyan government. In short, at present
neither the US nor Europe wants to see Libya destabilised. This is corroborated
by an unnamed London-based Libyan exile and advocate of democratic
reform who was quoted as saying, “opponents [of the Libyan regime] have
written off the possibility of receiving tangible political support from the
United States”. The Libyan government is also fully aware of the US’s priorities
and knows that it will not be pressing too hard on democratisation in the near
future. This gives organisations like the QICF ample scope to debate political
reform at length, without actually having to do anything about it. The exercise,
however, will do no harm to Mr Qadhafi’s profile: he will gain international
kudos by demonstrating his democratic credentials, while perhaps boosting his
domestic reputation by being seen to engage with—rather than repress—the
regime’s opponents.
Cabinet tensions persist Despite the general acceptance of Colonel Qadhafi’s overweening political
authority, he maintains the impression of being above the grubby machinations
of day-to-day politics. In doing so, he can at least maintain a distance from the
implementation of policy, avoiding blame when policies fail and accepting the
plaudits of success. His supremacy is further buoyed by political rivalries within
his cabinet, which ensure that ministers are more preoccupied by preserving
their own authority than by challenging his. Although the past quarter has seen
little political manoeuvring within the cabinet, there is no doubt that tensions
persist, the most consequential of which are between the prime minister, Shokri
Ghanem, and a number of veteran ministers and officials who oppose his
reform plans and resent his influence. These tensions were brought to the fore
at the session of the General People’s Congress (GPC) in January this year,
when the assistant secretary of the GPC, Ahmed Mohammed Ibrahim, made a
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18. 16 Libya
thinly-veiled rebuke of Mr Ghanem’s reform plans. Lesser squabbles in the
cabinet are mainly caused by the vying for power of ministers, many of whom
have seen their fortunes rise and fall several times, always at the whim of
Colonel Qadhafi. Ultimately, these tensions are more significant in determining
political outcomes, than are the various differences that also exist over the
technical aspects of policies, exemplified by the approach used for awarding oil
and gas exploration licences, a matter that divides the minister of energy, Fathi
bin Shatwan, from Mr Ghanem and the head of the National Oil Corporation,
Abdullah Salem al-Badri.
That Mr Ghanem has now survived as prime minister for more than two years
(he was appointed in June 2003) is testament to his powerful backing and his
political skills. The most significant of his supporters remains Saif al-Islam
Qadhafi, Colonel Qadhafi’s most influential son, although Mr Ghanem is also
supported by Mr Badri and two reformist ministers, Abd al-Qadir Bilkhair, the
economy and foreign trade minister (the post that Mr Ghanem used to hold),
and Taher al-Hadi al-Jehaimi, the planning minister (and former head of the
Higher Planning Council). However, although Colonel Qadhafi gave
Mr Ghanem a strong mandate for reform when he appointed him, which he
reiterated in 2004, he still maintains a notable distance from the prime minister.
Mr Ghanem is a key player in Libya’s transformation in that he possesses the
requisite economic expertise and authority to push through economic reform
and presents an acceptable face to the outside world. However, he operates
under a degree of political restraint, which ensures that his mandate is clearly
delineated and which prevents him from tampering with the domestic political
apparatus. This limited mandate makes Mr Ghanem both more accountable
and easily expendable and gives Colonel Qadhafi ample scope to replace him
should he feel the need to make a concession to Mr Ghanem’s opponents or
should Mr Ghanem begin to develop too strong a personal power base.
New doubt raised over Although the issue of the 1988 Lockerbie bombing is now firmly off the list of
Lockerbie conviction obstacles to Libya’s international rehabilitation, following Libya’s agreement in
2003 to pay compensation, questions surrounding the case remain. The most
concerning of these is centred on question-marks over the only conviction
resulting from the trial, that of Abdel-Basset al-Megrahi, a former Libyan
intelligence official. A number of lawyers and observers have held serious
doubts about his conviction ever since it was secured in January 2001, when
the only other person tried for involvement in the bombing (Al-Amin Khalifa
Fahima, another former Libyan official) was acquitted. There was also surprise
when Mr Megrahi lost an appeal against his conviction in March 2002, since
when he has been serving a life sentence in a Scottish jail. However, the recent
emergence of several important claims concerning the investigation has added
to residual doubts about the conviction, and Mr Megrahi’s lawyers are now
intent on securing a retrial.
The latest claim came in August from a retired Scottish senior police officer,
who has given a written statement to Mr Megrahi’s lawyers claiming that a
crucial piece of evidence in the case—a fragment of circuit board, which
allegedly came from the timer used to detonate the bomb—had been planted by
the US Central Intelligence Agency (CIA). The claim is not new: in 2003 a
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19. Libya 17
former CIA agent also gave a statement to Mr Megrahi’s lawyers alleging that
the circuit board had been planted, and claimed that that the CIA “wrote the
script” of the investigation to incriminate Libya. Furthermore, rumours about
the circuit fragment being planted date back to before the trial: the circuit board
was found in an area of woodland some miles from Lockerbie and months
after the bombing. However, until now no-one close to or involved in the
investigation has given a written statement to back up the claim. The police
officer apparently refrained from doing so before because of fear of vilification
and his expectation first that a conviction would not be secured, and then,
when it was, that it would be overturned at appeal. As neither eventuality
occurred, the officer in question reportedly felt he then had no choice but to
come forward with his evidence.
Mr Megrahi’s lawyers are now likely to argue that the new claim is especially
significant given that the circuit board was presented as a vital piece of
evidence in the conviction of Mr Megrahi. Their wish for a retrial is also
supported by others, such as Jim Swire, the father of one of the Lockerbie
victims and a representative for some victims’ families, who has said that he
believes Mr Megrahi is innocent. The likelihood of a retrial has therefore
increased, although for now the decision on whether to order a retrial rests in
the hands of the Scottish Criminal Cases Review Commission.
However, whether or not a retrial does come about, the case is unlikely to
jeopardise relations between Libya, the UK and the US. The Libyan authorities
long ago accepted responsibility for the bombing and have paid the bulk of the
compensation deal and have been rewarded with international political
acceptance. Although the actual financial cost of the Lockerbie compensation is
large (US$2.7bn), it is much less than Libya was losing under the sanctions
regime and much less than the benefits Libya is reaping from the lifting of those
sanctions. While the Libyan government may make noises over the fate of
Mr Megrahi, particularly in the event of an acquittal, it is unlikely to want to
rake up old arguments. In any event, Libya will be much more concerned with
securing its removal from the US State Department’s list of countries considered
to be involved in “terrorism”, an impasse over which the two states are still
quibbling and on account of which the payment of the final US$540m tranche
of compensation for the Lockerbie bombing is still outstanding.
Libyan-US relations continue Despite this last remaining hurdle, however, in every other respect relations
to prosper between Libya and the US continue to prosper. From Washington’s viewpoint
the advantages of deepening engagement with Libya—in particular co-operation
and exchange of information in the US’s “war on terror” and more accessible
oil—outweigh the disadvantages, such as concerns over democracy and human
rights. For the time being at least, the US appears to have clear priorities with
regard to Libya, with oil and “terrorism” trumping other issues. Reflecting this, a
steady stream of senior US officials have continued to visit Libya. In June the
US Treasury Department’s under-secretary for terrorism and financial
intelligence, Stuart Levey, visited Libya and met with Colonel Qadhafi, as well
as the finance minister, Mohammed Ali al-Huwaiz, and the governor of the
Central Bank of Libya, Ahmed Munaisi Abdel-Hamid, to discuss measures to
combat money-laundering. Subsequently, in July, a delegation of six members
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20. 18 Libya
of the US Congress visited Libya to meet Colonel Qadhafi and attend an energy
conference. Their visit was ostensibly against the wishes of the US State
Department, but the delegation nonetheless travelled on a US military jet.
Justifying the visit, one member of the delegation, a Republican congressman,
Mark Souder, explained succinctly that Colonel Qadhafi “wants to become an
energy player, and, simply put, we need oil”.
Following these visits, in August the chairman of the US Senate Foreign
Relations Committee, Richard Lugar, spent two days in Libya during which he
also met Colonel Qadhafi. Afterwards, Mr Lugar confirmed that US and Libyan
officials were working towards reopening embassies in each other’s country,
and ending the US designation of Libya as a country involved in “terrorism”.
Mr Lugar said that he had told Colonel Qadhafi that the US was committed “to
a continually improving relationship” as co-operation between Libya and the
US grew. However, as Mr Lugar subsequently revealed, Colonel Qadhafi took
the opportunity to complain that Libya had not received enough in return for
renouncing its programmes to develop weapons of mass destruction (WMD).
According to Colonel Qadhafi, Iranian and North Korean officials had asked
him what he had got in return for the renunciation, and he had answered
nothing. When Mr Lugar asked Colonel Qadhafi what sort of reward he had
been expecting, Colonel Qadhafi answered that he had wanted sophisticated
weapons from the US and the UK and, rather inexplicably, nuclear technology
for turning seawater into drinking water.
These remarks highlight Colonel Qadhafi’s trademark eccentricity, as well as his
disingenuousness. Libya renunciation of its WMD programmes was richly
rewarded, resulting in the lifting of US and EU sanctions and securing the
country’s political and economic reintegration into the global community. More
recently, in late August, the US also signed an agreement with Libya on using
nuclear technology for peaceful purposes.
Ms Rice meets Mr Chalgam Mr Lugar returned to Washington with an invitation for the US president,
George W Bush, and the US secretary of state, Condoleezza Rice, to visit Libya.
A visit by the US president is a non-starter, although following Ms Rice’s
meeting with the Libyan foreign minister, Mohammed Abderrahman Chalgam,
in New York on the sidelines of the UN summit, there is a possibility of her
visiting Tripoli in the future should the two countries finally fully normalise
their relationship. Indeed, rumours have already started circulating that she will
travel to Libya sometime before the end of the year. At the meeting, according to
a spokesman, Ms Rice “reaffirmed the US commitment to working to broaden
and deepen the relationship between Libya and the US,” while also stressing
the need for more progress on democratic and human rights reforms. With
regards to opening a full diplomatic mission in Tripoli, the spokesman was
quick to assert that “we’re not at that point yet”.
Obstacles remain over The case of six medics—five Bulgarians and one Palestinian—sentenced to death
relations with Europe for allegedly infecting some 400 children in Benghazi with HIV remains the key
stumbling block in relations between Libya and the EU. In May a Libyan court
postponed until November a hearing of the defendants’ appeal against the
death sentence that was passed on them in 2004. The defendants are widely
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21. Libya 19
believed to have been unfairly convicted, and Bulgarian and European officials
have long been looking for ways to resolve the case. In August the Bulgarian
foreign minister, Ivailo Kalfin, said that Bulgaria would not pay “blood money”
(known as diyya in Islamic law) to the victims’ families to secure the release of
the medics, as to do so would mean accepting guilt. Some of the victims’
families had in any case indicated that they were unwilling to accept blood
money. However, Mr Kalfin reiterated that the Bulgarian government was
willing to give assistance to Libya on humanitarian grounds, provided that this
was not considered to be an indemnity.
Although the case has dragged on for longer than the defendants and the
Bulgarian authorities may have expected, international support for the
Bulgarian government’s efforts to secure the release of the medics has been
building. Notably, the US has indicated to Bulgarian officials that it will not
normalise relations with Libya until the case is resolved. Meanwhile, in July, the
European Commission released €1m (US$1.2m) in funding for its “HIV Action
Plan for Benghazi”, a programme it agreed with the Libyan government to
provide policy advice and technical support on dealing with HIV and AIDS, as
well as help to upgrade to international standards the Benghazi Centre for
Infectious Diseases and Immunology. Officially, this assistance is not connected
to the Commission’s efforts to secure the release of the Bulgarian and
Palestinian medics. However, the connection between the two is plain enough,
and the Commission will be hoping that as its aid programme progresses a
solution to the medics case will be reached.
Illegal immigration remains Relations with Europe—most notably with Italy—also continue to be strained by
a problem the issue of migrants crossing the Mediterranean from Libya and landing
illegally on Italian territory. The scale of the problem is extensive: according to
the Sicilian coastguard, on one day alone in July, some 800 migrants landed in
four separate groups in different locations. The same month, the Maltese navy
announced that it had captured some 60 small boats, each 6 metres long and
capable of carrying 25 people, which it believes have been used for smuggling
migrants from Libya to Italy via Malta. However, these boats evidently represent
only a fraction of the overall number of vessels being used to transport
migrants across the Mediterranean. All the while, the Italian government has
been frustrated by what it considers to have been excessive Libyan demands for
material assistance in return for its co-operation. For its part, the European
Commission has insisted that any EU aid to help Libya deal with illegal
immigration must be dependent on human rights guarantees.
There are emerging signs, however, that Libya may become more co-operative
over illegal migration. In early July Libya and the EU held their first “technical”
meeting on the subject of how to prevent the deaths of migrants crossing the
Mediterranean, at which they agreed to start preparations for joint search and
rescue exercises, to begin in 2006. The same month, the Italian interior minister,
Giuseppe Pisanu, paid a surprise visit to Libya in an attempt to revive
discussions. At the same time the Italian and Libyan navies completed their
largest joint naval exercise in the Mediterranean since the two countries
resumed joint annual exercises in 2002. The exercise, called Nurs-2005, was
intended to develop naval co-operation in order to enhance maritime security
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22. 20 Libya
and prevent smuggling. Later that month, Tripoli also hosted an international
conference on maritime security in the Mediterranean, convened by the QICF
and the Advisory Committee on Protection of the Seas (ACOPS), a London-
based international non-governmental organisation. The conference included
representatives from Britain, France, Italy and the US, as well as Libya, and
although it produced no tangible outcomes, it was seen as an important step in
fostering dialogue.
Nevertheless, although enhancing naval capabilities will help tackle part of the
problem, it fails to challenge the core issue. Libya’s economy employs large
numbers of migrant workers, who come mostly from sub-Saharan Africa and
who perform the menial tasks that most Libyans refuse to do. For the fore-
seeable future Libya will continue to need its large migrant worker population;
indeed, the demand for migrant labour has been boosted by the surge in oil
revenue, which is contributing to a marked growth in the construction sector,
the industry in which most migrants are employed. In addition, Colonel
Qadhafi is showing no signs of wanting to renounce his Africa policies, which
include the espousal—at least in theory—of the free movement of people within
Africa, making Libya easily accessible to economic migrants from south of the
Sahara. Its proximity to Europe makes it all the more attractive.
Efforts continue to consolidate Persuading Colonel Qadhafi to curb some of his African policies, based on a
reputation in Africa somewhat fanciful vision of a united states of Africa, will be difficult and
require considerable concessions from the EU. Africa provides a stage on which
Colonel Qadhafi has real influence and power and he is unlikely to give it up
easily. He remains fully engaged in the affairs of the continent; indeed, much
more so than those of the Arab world.
Most recently, Colonel Qadhafi promptly added his voice to that of the
chairman of the African Union (AU), Olusegun Obasanjo, in condemning the
coup in Mauritania in August, and calling for a swift restoration of con-
stitutional government. Libya’s support of AU policy, which pledges to uphold
democratic principles, contrasts with accusations made by the overthrown
Mauritanian government that Libya was involved in several previous coup
attempts in Mauritania. However, there was never any clear evidence of Libyan
involvement in previous incidents, and there was no suggestion of Libyan
involvement in the August coup. With Libya at the time also chairing the Arab
Maghreb Union (AMU), the Libyan foreign minister, Mohammed Abderrahman
Chalgam, and the secretary-general of the AMU, Habib Boulares, flew to
Nouakchott to meet with the new Mauritanian president, Colonel Ely Ould
Mohammed Vall. After hearing Colonel Vall’s assurances, Mr Chalgam tactfully
said that Libya approved of the change of government in so far as the
Mauritanian people supported it.
Meanwhile, elsewhere in Africa Libya has continued its attempts to consolidate
its reputation. In August the Tanzanian government announced that Libya had
agreed to cancel US$102m in debts owed by Tanzania to Libya, thereby halving
its debt to Tripoli. The Libyan authorities agreed to the cancellation on the
condition that the resulting savings would be spent on education, health and
water. The same month, the Libyan authorities also agreed to waive price
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23. Libya 21
increases on jet fuel needed by UN aid agencies, including the World Food
Programme (WFP), for airlifting humanitarian supplies from Libya to Darfur.
The price of jet fuel was due to rise from US$0.13/litre to US$0.33/litre, an
increase that would have cost the WFP an extra US$1.5m a month. Such
gestures contrast strongly with Libya’s past reputation in Africa, where it was
widely believed to have assisted armed opposition groups in a number of
countries and fomented coups in others. Its more supportive policies are partly
designed to improve its credentials with the West, as well as to gain influence
across the continent.
Relations with Arab world Libya continues to give much less priority to its relations with the Arab world
are steady than to its relations with the West and Africa. Colonel Qadhafi seems to enjoy
antagonising the Arab League and sometimes other Arab leaders. However, he
and his government are careful not to jeopardise relations entirely, and in the
end most differences are diplomatically smoothed over. Relations with Saudi
Arabia are the latest example. In August the new Saudi ruler, King Abdullah bin
Abdel-Aziz al-Saud, announced the pardon of five Libyans accused of
involvement in a plot to assassinate him. The next month, the Libyan deputy
foreign affairs minister, Hassuna Shawish, announced that Libya had told the
Arab League that it was ready to restore diplomatic relations with Saudi Arabia.
Nevertheless, even if diplomatic ties are restored, they are likely to remain
frosty, with little love lost between Colonel Qadhafi and King Abdullah.
It is likely that Libya’s relations with its Arab neighbours may be tested again
shortly, with growing rumours that Colonel Qadhafi is considering visiting
Israel. The move will come as a surprise to many, since Colonel Qadhafi has
been an outspoken critic of Israel in the past, and one that the Israeli
government for many years believed to be a serious threat to its security. More
recently, however, he has been touting his own unique solution to the Israeli-
Palestinian conflict based on a bi-national state called “Isratine” and he was
quoted as calling both Israelis and Palestinians “idiots” for being unable to sort
out their differences.
It is unclear exactly what Colonel Qadhafi would achieve by visiting Israel,
apart from a spectacular opportunity for grandstanding and handing the Israeli
government an unsurpassable public relations coup. While seriously
antagonising many of his Arab neighbours, a visit would no doubt earn him a
degree of extra credit in Washington and would help smooth the path towards
Libya’s inclusion in the EU’s Euro-Mediterranean Partnership programme (for
which recognition of Israel is a prerequisite). However, with the likelihood that
he would receive nothing tangible in return, it would appear that the idea of a
visit appeals more to his sense of grand occasion and showmanship than to
any deeply considered political strategy.
Economic policy
Fiscal surplus set to double The Ministry of Finance is very poor at disseminating up-to-date data on the
government’s budget and fiscal position. Despite the absence of information,
however, it is evident that the government’s fiscal position remains very strong,
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