Share this story
Close X
Switch to Desktop Site

Oil drillers press US to ease Libya trade ban. IDLE RIGS

Earlier this year, representatives of the five major United States oil companies with properties in Libya met with senior US officials. Their purpose: to get the US to modify the sanctions barring trade with Libya so they could go back to running their oil concessions or sell them.

The administration has been wrestling with the issue since. Under consideration is whether to help the oil companies when the President's executive order imposing sanctions comes up for renewal on Jan. 8.

About these ads

Some officials want to modify the sanctions before Vice-President George Bush takes the helm. Others oppose altering the sanctions at all or otherwise limiting the new administration's options.

Complicating the matter, the wily Col. Muamar Qaddafi has undertaken a ``charm offensive'' to end his international isolation. According to informed diplomats, he recently signaled two moderate African heads of state that he wanted better relations with the US.

Libya watchers say Colonel Qaddafi apparently believes the Bush administration offers a chance to wipe the slate clean with the US.

No one in the administration is proposing dropping all sanctions on Libya. ``Qaddafi may be putting some powder on his nose,'' says one well-informed official, ``but we're trying to avoid giving Qaddafi a windfall and not hurt the oil companies.... We are all quite aware that Qaddafi is at the bottom of the American public's popularity list.''

US officials apparently are considering a ``technical correction'' to the sanctions. Some officials, however, reportedly favor allowing the oil companies to resume operations or sell out, while others are willing only to consider that option, pending improved behavior by Libya.

The skeptics would like to see Qaddafi distance himself from terrorism and respond to growing concerns about his reported chemical weapons facility before taking any move that could be interpreted as a gesture toward the colonel.

If President Reagan were to modify the sanctions significantly, it could well result in a loud outcry in Washington.

About these ads

Sen. Jesse Helms (R) of North Carolina, for example, wrote President Reagan Dec. 6 saying that ``it is imperative'' that the sanctions be renewed, given Qaddafi's continued ``support for international terrorism'' and Libya's ``development of a chemical warfare capability.''

Oil remains the key to Libya's foreign exchange earnings and to Qaddafi's ability to finance many of the operations that the US finds objectionable. Declining oil prices, however, have cut Libya's oil income significantly - reportedly 50 percent to $5 billion over the past year.

Some US officials and oil-company executives argue that unless the current sanctions are adjusted, Qaddafi might simply take over the US oil company assets or pay a very small compensation, when the current ``standstill agreement'' expires on June 30. Absorbing those US assets would give the Libyan leader a windfall profit and undermine long-term US strategic interests, they argue.

Ever since sanctions were imposed in June 1986, the US has barred Libyan oil imports and the operation of US oil companies there. The sanctions were imposed by Washington because the administration concluded that Libya had been directly involved in anti-US terrorism.

The sanctions had a sudden impact on five oil companies: Occidental Petroleum, Amerada Hess, Conoco, Marathon (a division of USX Corporation) and W.R. Grace. Until the sanctions were imposed, Petroleum Intelligence Weekly estimates, the companies had lifted 300,000 barrels of oil a day in Libya.

When Mr. Reagan banned trade with Libya, the oil companies signed a two-year ``standstill agreement'' with that country. It allowed the companies to keep their concessions during the sanctions, though Libya would keep the profits from ongoing production.

Qaddafi reportedly told some African leaders recently that as a goodwill gesture to the US, he would consider extending the standstill agreement past June.

According to Western intelligence sources, some of the oil companies have been in contact with Libya. One purported meeting took place two weeks ago in Europe with French oil interests who acted as intermediaries with the Libyans.

``We've had no meetings directly, or indirectly,'' says John McMillin, president of W.R. Grace's paper and mining division. Two other oil companies, Conoco and Marathon, likewise deny any contact with the Libyans. Amerada Hess and Occidental Petroleum did not return repeated phone calls.

The companies admit they are lobbying for the sanctions to be lifted - noting they have significant assets at stake.

W.R. Grace, for example, still has 20 million to 30 million barrels of oil in Libya. In its 1987 annual report, Marathon says it has under $100 million after taxes at risk there. According to industry sources, Conoco's share is about the same as Marathon's and Amarada Hess has approximately half that amount. Occidental's assets are reportedly not that large either, since it sold 25 percent of its holdings to an Austrian oil company.

Bernard Picchi, an oil analyst at Salomon Brothers Inc. says the assets are not worth much today if they were for sale. In addition, according to one estimate, the oil companies get only 25 cents per barrel since the Libyans exact a heavy tax.

Even so the companies have a long-term perspective on oil assets. That's why over the next few weeks they will be watching Washington to see if the political sands shift regarding Libya.

Follow Stories Like This
Get the Monitor stories you care about delivered to your inbox.