US companies with languishing interests in Libya are growing increasingly optimistic that international sanctions against that country may be removed as early as this spring, with US restrictions gone by the end of the year.
US government and industry sources said earlier this month that Libya has reached a tentative agreement with the US and the UK to accept civil responsibility for the 1988 bombing of Pan Am flight 103 over Lockerbie, Scotland, and to pay the families of the 270 victims $5-10 million, depending on how fast the US and the United Nations lift commercial sanctions.
Those sanctions, along with a related US law designed to discourage foreign companies from investing in the North African county, have kept its oil sector stagnant.
A formal announcement may happen by this week, US government sources said. Department of State officials were to have met with families of the Pan Am 103 bombing victims Mar. 12 in Washington, a source close to the talks said, with an announcement possible at presstime last week. The proposal builds on an offer made last May by Libyan officials.
Money tied to sanctions
Under the proposal, the families each would receive $4 million, conditioned on an acceptable "responsibility statement" by the Libyan government and the immediate removal of international commercial sanctions by the UN (OGJ Online, May 30, 2002).
Families then would receive an additional $4 million each once unilateral US sanctions are lifted, and an additional $2 million each when Libya is removed from the US State Department's list of sponsors of terrorism.
If neither of those two steps occur within 8 months of the deal, Libya agrees to pay the families an additional $1 million each.
The key issue still being discussed relates to a statement of Libya's culpability for the attack, notes Raad Alkadiri, an analyst with PFC Energy (formerly Petroleum Finance Co.) of Washington, DC.
US government officials and the victims' families have consistently demanded a strongly-worded admission of responsibility from Libyan officials.
Tripoli, which is keen to ensure that any admission of responsibility does not lead to further legal problems down the line, has provided the text of a statement that was still being scrutinized by the Bush administration and the families.
US government sources say that, pending some minor amendments, the statement is "very promising."
Oil and gas sector
This latest round of talks comes after months of negotiations among midlevel officials from the UK, US, and Libyan governments. Alkadiri stressed, however, that an agreement does not signal the imminent opening of Libya's oil and gas sector to US companies. "That will have to wait for a decision by the White House and Congress to lift US sanctions on Libya, which could take some time, particularly given the impending war in Iraq and the 8-month deadline contained in the Libyan proposal," he said.
"Nonetheless, Libya's initiative, if accepted, will diminish opposition among the families to a lifting of the embargo." Given the financial inducements for the families, it also could prompt them to pressure the Bush administration to proceed with its part of the bargain.
Most US-based multinational oil companies are interested in potential business with Libya because of its low production costs and ready access to western markets. But three companies—Occidental Petroleum Corp., Marathon Oil Co., and ConocoPhillips —stand to gain immediately from any reversal in US-Libyan relations.
Those three companies still have Libyan oil fields and have been carefully watching the talks among the Libyan government, the US, and the UK over the past year.