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Libya 'will direct oil to friends'

Libya's government has threatened to base decisions on future oil deals on how nations react to the uprising seeking to oust Muammar Gaddafi.

Shukri Ghanim, who sets Libya's oil policy as the head of the national oil company, said the country would honour its current commitments while trying to recover from a huge drop in production.

As for future deals, "a friend in need is a friend indeed", he told reporters in Tripoli. "If someone stood with you, you cannot tell him no."

Any government that opposes Gaddafi, Ghanim said, "will be treated differently from the one who did not come and start spreading rumours from out of the blue".

Since the uprising's start last month, Gaddafi has violently repressed dissent and sent forces to recapture rebel-held towns and oil fields. Regime forces were striking the rebel stronghold of Benghazi on Saturday.

During the rebellion, Libya has gone from a promising economy with the largest proven oil reserves in Africa to a country in turmoil. The foreign workers who underpinned the oil industry have fled, oil production and exports have all but stopped, and the country's currency has dropped 30% in two weeks.

Ghanim acknowledged that production had dropped to less then 400,000 barrels a day from 1.7 million barrels a day because foreign experts had fled and oil fields had been looted.

He said most oil fields had been "restored" and that he had been in touch with foreign oil companies to convince them to send their experts back to Libya.

"We are still considering all our contracts and agreements with the oil companies valid," he said. "We hope from their part that they will honour their agreements, that they will send back their experts and their people to work."

Should these companies balk, however, Libya would seek labour elsewhere, he said.

"If the work force is not coming, if the experts are not coming, we are of course in talks with other people to bring staff," he said, suggesting that labour could come from China, India or Brazil.

The rebels still hold much of eastern Libya, home to most of the country's oil reserves. Oil prices slid after the ceasefire announcement, plunging about 2.50 US dollars (£1.50) in the first 15 minutes of New York trading. They were down slightly for the week, settling at 101.07 US dollars (£62) per barrel on the New York Mercantile Exchange.

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