US investors eye up Libya

By James Whittington BBC World Service Africa Business Editor

Gaddafi yearns respectability

United Nations sanctions against Libya are expected to be lifted in a matter of days. But will it spell an investment boom?

The UN move is unlikely to have an immediate impact on Libya's economy.

Many European companies have been doing business with Libya since UN sanctions were suspended a few years ago.

But American firms remained banned from doing business there because the US Government has its own sanctions.

American officials say their sanctions will not end until the Libyans show they no longer support terrorism.

But there are commercial interests at stake.

European competition

A number of US oil companies have been lobbying hard in Washington to be able to return to Libya where they have claims on a number of important oil fields.

The Oasis consortium, which includes Houston-based Marathon Oil Corporation and ConocoPhillips, had been working on the fields until sanctions were first imposed after the Lockerbie disaster.

Their claims have been held in trust by the Libyan Government.

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But this expires in 2005 giving Tripoli the chance of opening up the concessions to other companies.

Phillip McCrum, a Libyan expert at the Economist Intelligence Unit, believes that American oil executives are desperate not to lose out on this opportunity.

"There are indications that Washington is already loosening its stance towards Libya in the sense that it is allowing its companies to start negotiating with the Libyan government about their oil interests," he told the BBC.

"With President Bush coming from Texas and having oil interests very much at heart, I think this Oasis consortium could put pressure on the US administration and will be able to demonstrate that if the US government doesn't allow it back in, there would be good reason to hand over the blocks... to European oil organisations."

Overall, Libya's economy has been doing reasonably well over the past few years, as it has benefited from higher oil prices.

European oil companies have been developing the oil sector since UN sanctions were suspended.

But a huge amount of investment is still required to raise capacity to its full potential.

And for this, the Libyans are hoping the Americans will once again become involved.