International executives have been responding to opportunities posed by lingering American economic sanctions. Hundreds of businesspeople from Britain, France, Italy, Russia, China and Canada have recently visited Libya, lured by its roughly $12 billion in annual oil revenue. The British oil firm Lasmo is one of the numerous multinationals to have signed hefty contracts. In addition, Airbus, the European aircraft consortium, is prepared to sell 24 passenger jets valued at $1.5 million to Libya's national carrier.
Since the U.S. administration continues to prohibit commercial activity with Libya, American firms are the main losers in the game. Recognizing this lost opportunity, US businesspeople with strong political connections have initiated a quiet but feverish lobbying campaign to have this ban lifted. These efforts have borne fruit. Following Qadhafi's release of the two Lockerbie suspects, the White House eased economic sanctions on food and medicine. Plans are currently in an advanced stage to ship 20,000 tonnes of durum wheat to Libya, and tens of millions of dollars of additional deals could be signed by the end of this year. Furthermore, the US government has permitted Occidental Petroleum and Oasis, a consortium consisting of Conoco, Marathon and Amarada Hess, to survey wells they once operated.
In recent months, Qadhafi has publicly acknowledged the need to diversify the economy beyond the energy sector. The Libyan ruler had grown increasingly frustrated with the government's protracted dependence on oil revenues, which account for approximately 95 percent of the state's foreign exchange revenues. The recently approved revised budget includes expenditures of $6.65 billion (versus $7.58 billion in 1999). Merely 20 percent of spending will be derived from oil revenues.
These figures do not, however, signify that aggregate public expenses are due to shrink. In the 2000 development budget, which is separate from the main budget and consists primarily of infrastructure investment, spending will be doubled to $3.82 billion. 70 percent of these outlays will accrue from oil export proceeds. Higher oil prices also strengthen the Libyan economy. Last year's real GDP growth reached 5.4 percent, higher than a previous forecast of 4.2 percent. This year, the economy is projected to expand by 4.7 percent.
© 2000 Mena Report (www.menareport.com)