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Case Studies in Sanctions and Terrorism: Libya

Case Studies in Sanctions and Terrorism

<< Case Studies Index

Case 78-8

United States v. Libya (1978-: Gadhafi, Terrorism)

Case 92-12
United Nations v. Libya (1992-99: Pan Am 103)

| Chronology of Key Events | Goals of Sender Country | Response to Target Country |
Attitude of Other Countries | Economic Impact | Assessment | Author's Summary |
Bibliography |

Economic Impact

Observed Economic Statistics

US sales of small aircraft, helicopters, aircraft parts, avionics to Libya in 1980 total $7.58 million (GAO 1987)

US oil imports from Libya before March 1982 are approximately 150,000 bbl per day because of recession (down from 700,000 bbl per day in 1981). US oil company assets in Libya at end of 1981 are valued at $500 million. (Schott 16-18)

Shrinking oil receipts put pressure on Libyan budget, since oil accounts for almost all of Libya's exports earnings. Despite severe shortages of food and consumer goods in 1985, Gadhafi orders cut in 1986 budget for imports to leave more money for capital projects; military budget is estimated at $2 billion, or about 40 percent of projected oil income. (New York Times, 29 January 1986, A16; New York Times, 2 May 1986, D1; Schumacher 340)

Budget squeeze in 1985 forces cancellation of $4.2 billion Soviet nuclear power plant, more than $1 billion in housing, road projects, $700 million in military construction projects. (Schumacher 344, 337)

All but one US oil company temporarily suspended exports of Libyan crude following announcement of US sanctions in January 1986; however, level of production is reportedly maintained by European oil companies in Libya. Prior to sanctions US companies account for one-third of Libyan production of 1.2 million bbl per day. Action is also related to plunge in spot oil prices from $25 per bbl to $17 per bbl in mid-January before rebound to about $20 per bbl. (New York Times, 29 January 1986, A16; Washington Post, 30 January 1986, A1)

Treasury estimates, on basis of cash flow analysis, value of US oil concessions, other assets in Libya at "more than $1 billion." However, Occidental Petroleum, largest US operator in Libya, reports that its Libyan assets of $120 million amount to only 1 percent of its worldwide total. (New York Times, 6 May 1986, A14)

In 1986 Libya is in arrears on $3 billion to $4 billion in loans from Western countries; Italy, Libya's largest creditor, agreed in 1984 to an oil barter arrangement to reduce Libyan debt. In addition, Libya owes about $4 billion to USSR for military equipment. (Financial Times, 22 April 1986, 4)

As of May 1987, "the impact on the Libyan oil and petrochemical industry has been minimal. ... The departure of US oil companies from Libya has had little effect because the oil previously produced and sold by these companies is now produced and marketed by the Libyans, providing them with additional revenues. ... [P]roduction levels of Libyan crude oil have remained about the same as they were before the imposition of the sanctions. ... In addition, the extensive foreign availability of oil field equipment, supplies, and services allows Libya to meet its oil industry needs without having to rely on US oil equipment, supplies, and servicing companies. (GAO 1987, 2-3)

Libya receives 98 percent of its foreign income from oil sales. Europe (Germany, Spain, and Italy) is the largest destination for Libyan crude. (New York Times, 12 November 1993, A10)

As of January 1998, net blocked Libyan assets in the US amount to $966.1 million. (US Department of the Treasury, Office of Foreign Assets Control [OFAC], Terrorist Assets Report, January 1998, 5)

"UN sanctions imposed in April 1992 have not yet had a major impact on the economy because Libya's oil revenues generate sufficient foreign exchange that, along with Libya's large currency reserves, sustain food and consumer goods imports as well as equipment for the oil industry and ongoing development projects. In 1994, Libya's imports totaled $6.9 billion, compared to exports of $7.2 billion (f.o.b. estimated). The sanctions have, however, had an effect in painting Libya as a rogue state" (US Department of Commerce, Bureau of Export Administration, 1997, Annual Report, III-224)

"The main victim of the [UN] sanctions might have been the European industry. In 1992, Italy sold $1 billion of petroleum equipment to Libya, Germany $610 million, UK $400 million and France $319 million. Despite the embargo, Libya is likely to find alternative suppliers, such as Iran. ... Nevertheless, sanctions will have a substantial cost through the increase of overall transportation costs. Goods previously shipped by plane arrive now in Libya by land via Tunisia or by boat via Malta. According to some estimates this will quadruple prices of shipment." (Marchés Tropicaux, 16 December 1994, 2611)

"The National carrier, Libyan Arab Airlines, has been doubly hit by an air embargo and a spare parts embargo. While it still operates limited domestic flights, 21 out of its total fleet of 31 aircraft have been grounded due to lack of spare parts. The airline's chairman recently said that the air and spare parts embargoes had cost the airline $900 million since 1992." (Economist Intelligence Unit Country Report-Libya, 2nd quarter 1997)

"The only positive [economic] effect of the embargo consists of the import ban of weapons, greatly diminishing Libyan military expenditures. In 1989, Libya purchased $499 million of military equipment." (Marchés Tropicaux, 16 December 1994, 2611)

"The effect of the UN resolution on exporting oil would appear to be minimal. It bans the sale to Libya of pumps and other paraphernalia used in the loading of crude oil and products for shipment abroad. But presumably Libya is not finding it difficult to overcome this prohibition as the equipment in question such as anchor chains is neither unusual nor sophisticated. The UN resolution carries more bite on downstream activities by forbidding the export to Libya of specific items needed in refining as well as of licenses for refining processes. The items involved are described in terms of US American Petroleum Institute or American Society of Mechanical Engineers Standards and it seems conceivable that substitutes exist which are not covered by the UN list, although these may not be of the highest standard. The blacklisting of catalytic reactors and prepared catalysts is important as the licenses for constructing such reactors are held by American companies. The ban on Libya's acquisition of them means that the country will continue to be unable to upgrade its refineries to make more gasoline for internal consumption." (Gurney, 220-221)

"The sanctions are a nuisance to both government and population. They have delayed some investment in the oil industry and contributed to a rise in inflation by increasing the cost of imports. But it is Colonel Gaddafi's economic policies and the fall in oil prices that have led to a deterioration in day to day economic life." (Financial Times, 17 July 1996, 4)

"The UN freeze of funds held abroad by Libyan public authorities or by any Libyan undertaking was intended to restrict downstream and other financial investment in Europe by the Libyan government or NOC [national oil company]. ... The initial effect of this restriction on existing Libyan downstream activities in Europe was forestalled by the Libyan government reducing its holdings in companies involved in these functions. In the mid-1990's it appeared that, although its equity stake had been reduced in such operations, Libya was continuing to play a significant role in the direction of these companies as a result of their dependence on quality Libyan crudes in their refineries. Presumably, this will continue." (Gurney, 220-221)

"Sanctions have also put an effective stop to privatization and to any liberalization of the economy and trade. Privatization Law No. 9, of September 2, 1992, has not been implemented because the state has tightened its control over the economy to deal with the sanctions." (Economist Intelligence Unit Country Report-Libya, 2nd quarter 1995, 18)

"The World Bank estimated that sanctions have cost Libya as much as $18 billion in lost revenue, mostly as a result of underinvestment in oil." (Economist, 13 March 1999, 56)

"Libya estimates that the sanctions have deprived its economy of $33 billion, whereas the World Bank puts the damage at the lower but still daunting sum of $18 billion." (Takeyh 64)

"Already, in the 1980s, low oil prices had sparked an economic recession from which Libya could not escape. The sanctions of the 1990s then exacerbated the woes of an economy that was plagued with 30 percent unemployment and 50 percent inflation rates. Tripoli embarked on an austerity program, freezing salaries and reducing subsidies, but this proved dangerous for a regime that depended for its survival on buying the population's acquiescence." (Takeyh 65)

Libya: Trade with United States and total trade, 1980-88 (millions of dollars)


Year US exports to Libya US imports from Libya Total Libyan exports Total Libyan imports

1980 509 8,905 21,919 6,776
1981 813 5,476 15,575 8,382
1982 301 533 13,300 8,608
1983 191 1 12,116 7,730
1984 200 10 10,655 7,058
1985 311 47 10,897 5,488
1986 46 2 6,204 4,607
1987 - - 6,878 5,142
1988 - - 6,793 6,225
1989 - - 8,617 4,393
1990 - - 13,878 5,663
1991 70 - 11,212 5,339
1992 70 - 9,942 5,164
1993 - - 7,535 5,370
1994 - - 7,790 4,153
1995 - - 8,465 4,850
1996 - - 10,033 5,137
1997 - - 9,910 5,597
1998 - - 6,032 5,600
1999 - - 7,961 4,253
2000 18 - 12,716 4,018
2001 9 - 11,337 4,425
2002 18 - 9,879 5,517
2003 - - 13,763 6,102
2004 39 346 19,314 8,120

Source: IMF, Direction of Trade Statistics Yearbooks, 1995, 1996, 2005; Direction of Trade Statistics Quarterly, June 1998.

Libya: Petroleum exports, revenues, and prices, 1985-2004


Year
Crude oil exports
(1000 barrels / day)
Value of petroleum exports
(billions of dollars)
Libyan crude
(Brega spot price
per barrel, $)
 

1985 880 12 27.79  
1986 1,051 8 14.31  
1987 804 6 18.08  
1988 882 6 14.72  
1989 868 7 18.21  
1990 1,300 10 23.82  
1991 1,445 10 20.41  
1992 1,370 9 19.54  
1993 1,270 7 17.08  
1994 1,285 8 15.91  
1995 1,310 7 17.21  
1996 1,295 10 21.06  
1997 1,116 9 19.36  
1998 1,161 6 12.90  
1999 992 8 18.08  
2000 1,005 12 28.65  
2001 988 11 24.70  
2002 984 10 24.96  
2003 1,127 14 29.00  
2004 1,285 19 38.35  

Sources: OPEC Annual Statistical Bulletin, 1996, 2004; CIA Handbook of International Statistics, 1996.

Libya: Arms imports, 1986-1999


Year
Arms imports
(millions of dollars)

1986
1,200
1987
600
1988
950
1989
110
1990
370
1991
410
1992
90
1993
0
1994
10
1995
0
1996
40
1997
10
1998
30
1999
20

Sources: Arms Control and Disarmament Agency, World Military Expenditures and Arms Transfers, 1997; Bureau of Verification and Compliance, World Military Expenditures and Arms Transfers, 1999-2000.

Libya: Balance of payment statistics, 1984-2004 (millions of dollars)


Year International transportation account International travel account
 



  Receipts Expenses Receipts Expenses

1984
98
-956
4
-503
1985
49
-668
2
-409
1986
49
-476
2
-149
1987
64
-541
3
-319
1988
71
-380
7
-552
1989
66
-363
5
-512
1990
70
-388
6
-424
1991
54
-533
8
-1374
1992
55
-488
7
-183
1993
19
-480
8
-147
1994
16
-419
3
-116
1995
12
-330
2
-76
1996
11
-568
2
-67
1997
11
-345
2
-269
1998
21
-409
7
-281
1999
19
-405
27
-402
2000
16
-350
75
-397
2001
18
-453
78
-445
2002
41
-522
181
-586
2003
58
-661
205
-557
2004
63
-645
218
-603

Source: IMF, Balance of Payments CD, June 2006.


Calculated Economic Impact (annual cost to target country)

US v. Libya (annual cost to target country)


Period I: 1981-85  
Cutoff of US imports of 150,000 bbl per day of Libyan oil; with no reduction in overall Libyan exports, cutoff forces Libya to discount price by estimated 10 percent (or $3.70 per bbl)-of which 5 percent is attributable to market forces, 5 percent to sanctions $101 million
Reduction in nonoil US-Libyan trade as result of export, import controls; welfare loss estimated at 30 percent of face value of trade (including welfare cost of blocked US exports of sensitive oil, gas field technology) 10 million
Withdrawal of US citizens from Libya; estimated 10 percent increase in estimated $75,000 average annual salary to hire non-US oil field workers to replace about 750 US employees who leave 6 million
Suspension of sale of Boeing jets to Libya; welfare loss estimated at 10 percent of value of trade 60 million
 
Offset  
Sale of Exxon's Libyan assets to Libya for less than book value ($121 million v. $95 million settlement); welfare gain valued at 100 percent of difference ($26 million)
   
Average Annual Cost, 1981-85 $151 million
   
Period II: 1986-98
Reduction in US trade with Libya as result of embargo; welfare loss estimated at 30 percent of drop in trade from average annual value in 1983-85 $253 million
Freeze of Libyan assets in US; welfare loss estimated as 10 percent of face value of assets frozen $97 million
 
Average Annual Cost, 1986-2004 $350 million
   
Average Annual Cost, 1981-2004 $309 million

UN v. Libya (annual cost to target country, 1992-2003)


Reduction in trade resulting from UN embargo on aircraft and parts; welfare loss estimated at 50 percent of reduction in value of imports in 1993-96 compared to 1988-91 $7 million
Increased prices for petroleum refining and loading equipment resulting from UN ban on selected items; welfare loss estimated at 5 percent of the 1992 value of European exports of petroleum equipment to Libya $115 million
Reduction in trade resulting from UN arms embargo, welfare loss estimated at 10 percent of average annual volume of imports in 1988-91 $70 million
Increased travel and transportation costs due to air ban; welfare loss calculated at 10 percent of value of average annual travel and transportation imports, 1988-90 $90 million
Nonoil assets frozen Negligible
   
Total, UN sanctions $282 million

Relative Magnitudes: Impact of US Sanctions


Gross indicators of the Libyan economy  
    GNP (1978)
    Population (1978)
$18.3 billion
2.7 million
Annual effect of US sanctions related to gross indicators
    Percentage of GNP
    Per capita

1.7
$114.40

Libyan trade with US as percentage of total trade  
    Exports (1980)
    Imports (1980)
34
6
Ratio of US GNP (1978: $2,164 billion) to Libyan GNP 118

Relative Magnitudes: Impact of UN Sanctions


Gross indicators of the Libyan economy  
    GNP (1992)
    Population (1992)
$30.6 billiona
4.9 million
Annual effect of UN sanctions related to gross indicators
    Percentage of GNP
    Per capita

0.9
$57.55

Libyan trade with UN members as percentage of total trade
    Exports (1992)
    Imports (1992)
Close to 100
Close to 100
Ratio of UN members' GNPb (1992: $18,400 billion) to Libyan GNP 601

Notes:
a. CIA number for 1993, PPP method used as estimate.
b. Combined GDP of member countries of the Organization for Economic Cooperation and Development (OECD) used as estimate.
Source: OECD.

 

Assessment

Geoffrey Kemp, former National Security Council staffer
"If the American goal is to topple the Gadhafi regime altogether, then sanctions won't do the job. But if the US has the more modest goal of deterring Gadhafi from his most egregious actions, then sanctions might be successful. ... Reducing Gadhafi's oil revenues wouldn't reform his character, but it would surely force him to cut back on development, arms purchases and funds for terrorists. The question, as always, is whether our European allies will cooperate." (Washington Post, 12 January 1986, D1)

Edward Schumacher
"Indeed, the April 1986 raid on Libya brought a lull in Arab-related terrorism. And the governments of Western Europe, scarcely supportive of the American show of force, nevertheless imposed sanctions, in part to placate the Americans. The sanctions prompted the departure of more than 600 Libyans from Western Europe, thus dismantling a logistical network for terror. ... The lull in terrorism was short-lived." (Schumacher 329)

Washington Post
"Four year after US warplanes bombed Gadhafi's house [in Tripoli] for his alleged support of terrorism, the Libyan leader seems eager to play the powerful penitent who can persuade Palestinian terrorist Abu Nidal to free hostages and can mediate between hard-liners in the Arab world. Gadhafi's drive for Western acceptance is fueled largely by a realization that he has lost the generous support—including military advisers and arms—that he once enjoyed from the Soviet Bloc. ... But Gadhafi has not turned his back on revolutionary causes. ... Rebels who espouse 'anti-imperialist' causes are still regular guests here. And recently two Libyan diplomats were expelled from Ethiopia for allegedly planting bombs aimed at an Israeli envoy." (Washington Post, 27 May 1990, A35)

George Moffett
"As much as Gadhafi would like to break out of the sanctions, he is unable to pay the asking price by extraditing the bombing suspects for trial in Scotland where they would be accessible to questioning by US and British intelligence. If Gadhafi turned over the two agents, he would almost certainly weaken the morale of the Libyan internal security forces at a time when he needs them most." (Christian Science Monitor, 9 November 1994, 1)

Suleiman Bengharsa
"The unilateral sanctions regime imposed by the US on Libya has had no major negative economic effects on that country. The reason is an obvious one: a unilateral sanctions regime cannot work if what has been sanctioned by one country can be purchased form another or a variety of other countries. ... Overall, UN sanctions have helped to further ostracize and isolate the Gaddafi regime." (Bengharsa 1996, 2, 7)

Gideon Rose
"To judge the wisdom of employing sanctions in any particular case, one must answer two separate questions: How effective particular sanctions are likely to be in the circumstances at hand and how they compare to other potential policy options. The sanctions against Libya fare poorly on the first count but well on the second. ... [In this case,] limited sanctions have represented an acceptable middle course, one yielding modest benefits for a modest price. They have helped to manage a difficult foreign policy challenge if not to master it.

"The years of sanctions have hobbled Libya's conventional military capability, grounded its air force, and crimped its weapons of mass destruction (WMD) programs. All this has substantially reduced the threat Qaddafi poses to his neighbors and the world at large, at least compared to what would have been the case had he been allowed to carry on business as usual.

"The U.S. shift to extraterritorial sanctions against foreigners doing business in Libya, on the other hand ... violates this prudent calculus by needlessly picking a potentially major fight with important allies. ... However the transatlantic fight over Helms-Burton and ILSA [the Iran and Libya Sanctions Act] is resolved, the latter Act's Libyan-related sections are wrong-headed simply because they raise the priority and costs of Libya policy far above what is appropriate, given the full range of American global foreign policy interests." (Rose 145-46)

Financial Times
"The key to resurrecting the Lockerbie case was the US and British decision-in a UN resolution last August-to agree to Col. Gadaffi's long-standing proposal that the two suspects be tried in a neutral country rather than in Scotland. ... [Also, w]ith oil prices falling, the sanctions on Libya, although far from the comprehensive embargo imposed on Iraq, were biting. Money was running out. ... [B]y banning travel, arms sales, purchases of some oil equipment and imposing a freeze on certain assets, the sanctions deprived the oil industry of much needed development and complicated management of the economy by raising the cost of most transactions." (Financial Times, 6 April 1999, 12)

Wall Street Journal
"As we've often said, sanctions are blunt instruments that rarely have the intended consequence and more often injure those most victimized by a despot's reign. The Libyan sanctions were a rare exception to that rule largely because most of the civilized world united behind the limited sanctions imposed by the United Nations." (Wall Street Journal, 7 April 1999, A22)

David Cortright and George A. Lopez
"On balance, UN sanctions can be rated a partial success. The limited sanctions on travel, oil equipment, and finance did not have major economic impacts, but they were sufficiently burdensome to encourage the search for a negotiated settlement of the dispute. By themselves sanctions did not resolve the dispute, but they provided a crucial bargaining framework around which a final settlement could be reached. More important, sanctions encouraged the Libyan government to reduce involvement in the underworld of terrorist violence and served as an effective deterrent against the government's support for international terrorism." (Cortright 120-121)

Ray Takeyh, Soref Research Fellow at the Washington Institute
for Near East Policy

"..[T]hat Qaddafi surrendered the suspects [in bombing of Pan Am flight] suggests that international pressure has prompted subtle yet significant changes in his foreign policy.

"The colonel had long believed that Libya's oil wealth and commercial appeal would undermine any cohesive opposition to his revolutionary excesses. But the Lockerbie sanctions, enacted by the United Nations in 1992, shattered that conviction. The United States managed to convince even states with close economic ties to Libya, such as Italy and Germany, to support the sanctions as a way to force Qaddafi to hand over the bombing suspects.... For the first time, Qaddafi's militancy incurred a palpable cost.

"...U.N. sanctions - particularly the prohibition on the sale of oil equipment and technology and a ban on financial transfers - hit Qaddafi where it hurt the most, undermining his government's ability to extract and export its main source of revenue." (Takeyh 63-64)

Ray Takeyh, National Defense University
"What forced Gaddafi to act was a combination of things—U.N. sanctions after the Lockerbie bombing, his international isolation after the Soviet Union's collapse . . . and internal economic problems that led to domestic unrest by Islamists and forces within the military." (Washington Post , 20 December 2003, A1, A18)

Gary Samore, Institute for Strategic Studies in London
"The disarmament agreement with Libya is a dramatic victory for traditional non-proliferation diplomacy—the use of incentives and sanctions to persuade governments to abandon weapons of mass destruction programmes in exchange for political and economic rewards." ( Financial Times , 22 December 2003, 11)

Joseph Cirincione, Carnegie Endowment for International Peace
"It's [the disarmament agreement] not a dramatic turn around. It's part of a trend that has been underway for 10 years—of reforms and trying to reintegrate with Europe, mainly for business reasons. . . . Gaddafi has turned away from radical Arab nationalism of the 1970s and 1980s toward programs geared toward economic development that require Western investment and markets, which means coming into line with international norms." (Washington Post , 20 December 2003, A18)

Financial Times
"The US has sought to portray Libya's unexpected announcement on Friday as a result of the Iraq war. But the Libyan shift was part of a long and systemic process that Col. Gadaffi . . . has consistently pursued since the early 1990s. . . . Driven above all by a need to secure the survival of his regime, Col. Gadaffi realized after the 1986 US bombing of Libya—and even before US and United Nations sanctions were imposed—that his role as sponsor of rebels and terrorists carried too high a price." (Financial Times, 22 December 2003, 3)

Flynt Leverett
". . . Libya was willing to deal because of credible diplomatic representations by the United States over the years, which convinced the Libyans that doing so was critical to achieving their strategic and domestic goals. Just as with Lockerbie, an explicit quid pro quo was offered: American officials indicated that a verifiable dismantling of Libya's weapons projects would lead the removal our own sanctions, perhaps by the end of this year. The lesson is incontrovertible: to persuade a rogue regime to get out of the terrorism business and give up its weapons of mass destruction, we must not only apply pressure but also make clear the potential benefits of cooperation." (New York Times , 23 January 2004, A25)

Geoff D. Porter
“. . .[T]wo decades of American and United Nations sanctions diminished Libyan oil revenues. The country's oil fields were declining, exploration was all but halted, and Libya was forbidden to import new oil extraction technology. At the same time, Libya's population was booming. . . .The mixture of population growth and declining oil revenues endangered Colonel Qaddafi's ability to hold on to power. Starting in the mid-1990's a younger generation of reformers…began to convince Colonel Qaddafi the he could not maintain his rule without more income. With virtually no other resources, increasing oil revenue was the only option, but to do this Colonel Qaddafi needed sanctions lifted. The steps that he took in regard to the Lockerbie bombing, the UTA flight and finally the renunciation of weapons of mass destruction were all aimed at removing sanctions. . . . Colonel Qaddafi brought Libya in from the cold not because he was afraid that the United States might toople him, but because he was afraid of losing his grip on power domestically.” (New York Times , 31 July 2004, A17)

Author's Summary

US v. Libya

Overall assessment  

Policy result, scaled from 1 (failed) to 4 (success)

4

Sanctions contribution, scaled from 1 (none) to 4 (significant)

3

Success score (policy result times sanctions contribution) scaled from 1 (outright failure) to 16 (significant success)

12
   
Political and economic variables  

Companion policies J (covert), Q (quasi-military), R (regular military)

J,Q

International cooperation with sender, scaled from 1 (none) to 4 (significant)

1

International assistance to target A (if present)

-

Cooperating international organizations

-

Sanction period (years)

26

Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)

2

Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)

1

Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)

1

Type of sanction X (export), M (import), F (financial)

X,M,F

Cost to sender, scaled from 1 (net gain) to 4 (major loss)

3

UN v. Libya

Overall assessment  

Policy result, scaled from 1 (failed) to 4 (success)

4

Sanctions contribution, scaled from 1 (none) to 4 (significant)

3

Success score (policy result times sanctions contribution)scaled from 1 (outright failure) to 16 (significant success)

12
   
Political and economic variables  

Companion policies J (covert), Q (quasi-military), R (regular military)

-

International cooperation with sender, scaled from 1 (none) to 4 (significant)

4

International assistance to target A (if present)

-

Cooperating international organizations

-

Sanction period (years)

11

Economic health and political stability of target, scaled from 1 (distressed) to 3 (strong)

2

Presanction relations between sender and target, scaled from 1 (antagonistic) to 3 (cordial)

2

Regime type of target, scaled from 1 (authoritarian) to 3 (democratic)

1

Type of sanction X (export), M (import), F (financial)

X,F

Cost to sender, scaled from 1 (net gain) to 4 (major loss)

2

Comments

Gadhafi’s recent decision to disclose and dismantle Libya’s weapons of mass destruction (WMD) programs seems part of a long-standing effort to improve relations with the United States and the United Kingdom and end the country’s international isolation.

Several factors influenced Libya’s change in policies. Internal economic problems caused by decades of economic mismanagement and declining oil production threatened the legitimacy of his regime. US and UN economic sanctions following the Lockerbie bombing exacerbated these difficulties and hampered efforts to revive the economy. The need for foreign investment, particularly in the oil sector, certainly played a role in Gadhafi’s decision to seek improved relations with the West. Intense diplomatic efforts on the part of South African President Nelson Mandela, UN Secretary General Kofi Annan, and others also were important in launching negotiations between the United States, the United Kingdom, and Libya in the late 1990s. These negotiations led to the compromise allowing for the surrender of two suspects in the Pan Am bombing, agreements on compensation for the families of the victims of the Lockerbie and UTA bombings, and Libya’s admission of guilt and renunciation of terrorism.

Similarly, Gadhafi’s decision to renounce WMD reflected a desire to benefit from the return of US oil companies and US technology and know-how. Nevertheless, given the renewed interest of European companies and others to invest and trade with Libya after the suspension of UN sanctions in 1999, unilateral US sanctions were not the only factor at work in the WMD decision. Libya concluded that WMD development was neither politically nor economically advantageous and posed a major obstacle to ending the country’s international isolation. Diplomatic channels and relationships developed during years of trilateral negotiations over Lockerbie were critical for the launch of talks on WMD. After WMD negotiations began, the Bush administration’s policy of preemptive war, exemplified in Iraq, and the success of US-led interdiction initiatives aimed at interrupting trade in illegal goods amplified the speed and extent of Libyan concessions.

Hence we conclude that US sanctions made a modest contribution to Libya’s renunciation of terrorism and WMD. Our preliminary scoring of the policy outcome (a score of 3) reflects the fact that at the time of this writing it remains to be seen whether Gadhafi will follow through on promises made. If US demands for verifiable dismantlement of Libya’s WMD programs are met in the coming months and sanctions lifted, then a score of 4 (success) would be justified. The US goal of destabilizing Gadhafi has been abandoned, given the regime’s substantial changes in policy.

Targeted but multilateral UN sanctions against Libya succeeded more quickly, contributing at least modestly to Libya’s decision to surrender Pan Am suspects, offer compensation to the families of the victims, and renounce terrorism.

Bibliography

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