Libya daunting for US firms despite better ties

For US companies long excluded from Libya, Secretary of State Condoleezza Rice's visit to Tripoli is a green light for business.

But getting a toehold in Muammar Gaddafi's energy-rich North African country may prove the easy part.

An opaque bureaucracy, erratic decision-making and suspicion built up over decades of isolation means foreign firms may struggle to benefit fully from a wealth of money-making opportunities in Libya, analysts say.

US-Libyan ties have improved dramatically since 2003 when Libya gave up banned weapons programmes, and both countries saw the benefits of lifting hurdles to trade and investment. American companies got involved in Libyan oil and gas after the end of sanctions, but many have held back for fear US courts might freeze their assets for doing business with Libya before terrorism compensation claims are settled.

Those fears receded this month after the two countries agreed to set up a fund to cover the claims.

"Once the fund is funded I think there will be a big impact on the expansion of US business in Libya and Libyan business in the US," said David Goldwyn, executive director of the US-Libya Business Association in Washington.

Libya's investment authority, looking for new destinations for growing oil profits, will be able to invest in the US or join US companies to enter other markets, he said. Washington raised the status of its Tripoli liaison office to an embassy in 2006 but its diplomatic presence remains small.

A succession of European leaders have visited Libya to drum up business. Italy agreed to pay €3.5 billion in compensation for misdeeds during its colonial rule of Libya and was promised energy deals and other business in return.

"American companies will be in fierce competition with Europeans, Asians and others, so we need to get on the plane and go to Libya and build relationships face to face," said David Hamod, head of the National US-Arab Chamber of Commerce.

Libya's energy industries earned over €28 billion last year and the government wants to nearby double oil output capacity to three million barrels per day by 2012.

Part of the profits will be used to upgrade and rebuild roads, ports, schools and factories in the country of six million that fell into disrepair during the years of sanctions.

Top US construction companies, drinks makers and software firms have made forays into Libya but had mixed results, said Rajeev Singh-Morales, a senior partner at Boston-based Monitor Group, which produced an economic strategy report for Libya.

Many ministries and tribal groups have a say in policy, which could aid political stability but slows decision making.

Col Gaddafi has watered down his socialist system in recent years to allow more private sector activity but a culture of business transparency is absent, analysts say.

Chronology of Libya's choppy relations with the US

January 1986 - US President Ronald Reagan orders halt to economic and commercial relations with Libya, freezes Libyan assets in the US.

April 1986 - Libya blamed for bombing of West Berlin disco used by US servicemen that killed three people and injured more than 200.

April 1986 - US aircraft bomb Tripoli, Benghazi and the home of Libyan leader Muammar Gaddafi. Libya says more than 40 people are killed, including Col Gaddafi's adopted baby daughter.

December 1988 - Pan Am flight 103 from London to New York blows up over Scotland, killing 259 people on board and 11 people on the ground in Lockerbie.

April 1999 - Libya hands over two suspects in the bombing of Pan Am flight 103. They stand trial in the Netherlands under Scottish law. EU suspends sanctions against Libya.

January 2001 - Three judges unanimously find Abdel Basset al-Megrahi guilty of murder and acquit Al-Amin Khalifa Fahima. Mr Megrahi is given a mandatory life sentence. In June 2007, an independent review body said Scotland's High Court would hear an appeal by Mr Megrahi against his conviction.

March 2003 - Libya reaches political agreement with the US and Britain to accept civil responsibility for the bombing. Libya agrees to pay about €1.8 billion in total.

January 2004 - Lawmakers arrive on the first visit by a US congressional delegation to Libya since Col Gaddafi came to power.

June 2004 - US resumes diplomatic ties after 24 years.

September 2004 - Libya signs a deal to pay €24 million compensation to more than 160 victims of the 1986 Berlin nightclub bombing.

September 2004 - President George W. Bush formally ends US trade embargo on Libya rewarding it for giving up weapons of mass destruction but leaves some US terrorism-related sanctions in place.

February 11, 2005 - US ends a restriction barring Libyan diplomats in the US from travelling more than 25 miles from Washington and New York.

September 28, 2005 - Mr Bush waives some defence export restrictions to allow US companies to participate in destroying Libya's chemical weapons.

May 15, 2006 - US says it will take Libya off the list of countries deemed state sponsors of terrorism.

July 11, 2007 - Mr Bush announces he is sending the first US ambassador to Tripoli in nearly 35 years.

January 3, 2008 - Mohammed Abdel-Rahman Shalgam, Libya's foreign minister, declares an end to confrontation with the US in a visit to Washington, the first by a Libyan foreign minister since 1972.

August 14, 2008 - Libya and the US sign a deal to compensate all US and Libyan victims of bombings or their relatives, clearing the way for the former foes to improve faltering ties.

US victims covered include those who died in the 1988 Pan Am flight and the 1986 attack on a Berlin disco.