By Leah Bower

It is a businessmans ultimate dream a country, virtually untouched by Western companies, where consumers hunger for new products and have the money to buy them.

Libya, shut off economically from much of the world by United States and United Nations sanctions that were in place for almost two decades, is a business paradise that a lot of international and Egyptian companies are eyeing with increasing interest.

What kept countries out of Libya were the long-standing sanctions signed by President Bill Clinton in 1996 that allowed the United States to penalize non-US companies that did more than $40 million in business annually with the rogue North African nation. The transaction amount was revised downward to $20 million in 2001. While the UN also had sanctions in place, they were not as restrictive.

Kodak Egypt General Manager Ali Abdel Ghaffar is already mapping out his companys route into the country, something that couldnt have happened a few months ago, since sanctions would have kept the New York-based firm out.

Were interested in Libya for two things. Geographically, it is the natural extension to the Egyptian border. As a market that was not exposed to a lot of multinationals because of the bans, it is also a very attractive virgin market, says Ghaffar. Everybody is trying to prepare their business model to go to Libya. With what is going on in the world a lot of competition, a lot of monopolies, saturation and developed markets a country that has high per-capita consumption and income and still is a virgin market has huge potential.

Its not only Western multinationals that are eyeing this untapped market. Orascom Construction Industries (OCI) (bt100 No. 2), which already has contracts throughout the Middle East and North Africa, is opening a unit in Libya as well.

Opportunities exist in Libya for us both as a construction contractor and cement producer, which have the potential to contribute significantly to our earnings growth, said Nassef Sawiris, CEO of OCI.

By following a similar business model (to Algeria), we believe OCI Libya will be an engine for future long-term growth, added OCI Managing Director Osama Bishai, in a company release. OCI ran a construction business in Libya in the 1970s, according to a company statement. OCI says it will pursue airport projects in particular.

Libya is Africas largest oil producer, providing extremely high-grade, sweet crude, which is known for its relatively pleasant smell due to a sulfur content that is less than 1 percent. It has very low production costs and the oilfields are close to the refineries and markets of Europe. In addition, Libya remains largely unexplored with vast oil and gas potential.

The US-based Oasis Group which includes ConocoPhillips, Marathon Oil, Amerada Hess and the Occidental Corp. already holds a 41 percent stake in Libyas massive Waha oil concession, although the bulk of those are due to expire in 2005. The Libyan state oil company took over the concessions when US sanctions forced Oasis out in 1986 and production slowed to a trickle, from a peak of more than 1 million barrels a day in 1969.

This removes the last remaining hurdle for our return to Libya to engage in full-fledged operations there, Larry Meriage, spokesman for Occidental Corp., told Reuters news service.

Of course, doing business in Libya is bound to be full of surprises. While Libyas eccentric leader Muammar Qadafi has taken pains to make peace with the West, he caused an uproar when he prematurely left the Arab League summit held late last month after scolding his regional counterparts for convening when two of the regions presidents Yasser Arafat and Saddam Hussein were in jail.

Sealed off

Although the sanctions wouldnt be put into place for another two years, relations between the United States and Libya started to deteriorate after 2000 Libyans ransacked the US embassy in Tripoli in December 1979. Then, in August 1981, President Ronald Reagan ordered US jets to attack targets in Libya, alleging that the nation was involved in terrorism. Later that year, Reagan forbade US passport holders to travel to Libya.

In 1982, as relations between the two countries continued to deteriorate, the United States slapped a ban on imports of Libyan oil and other exports.

The United Kingdom broke off diplomatic ties with Libya in 1985, when a 25-year-old unarmed police officer, Yvonne Fletcher, was shot during a protest outside the Libyan embassy in London. The shot, fired from a British-made Sterling sub-machine gun, which was standard issue to the Libyan army, was believed to have come from the first floor of the embassy. No one was ever charged in the shooting.

But the flashpoint came in 1986, when a two-kilogram bomb packed with plastic explosives and shrapnel exploded just after midnight on a Saturday. The target was the La Belle disco in West Berlin, a popular hangout with American soldiers stationed in Germany. Two US servicemen and a Turkish woman died in the blast, which left 229 people, 79 of them Americans, injured.

The United States, citing intercepted messages between Tripoli and agents in Europe, laid responsibility for the attack at Libyas feet and retaliated 10 days later with air strikes on the Libyan capital Tripoli and the city of Bengasi. At least 15 civilians and the daughter of Libyan leader Muammar Qadafi were killed in the attacks.

It was another terrorist attack that caused the relationship between Libya and the rest of the world to crumble. Pan Am Flight 103 exploded 9540 meters above the Scottish town of Lockerbie just 38 minutes after takeoff from London in December 1988. All 259 people on board the New York-bound flight were killed, along with 11 people on the ground. Investigators from the United States and United Kingdom later indicted two alleged Libyan intelligence agents Abdel Baset Ali Mohmed Al-Megrahi and Al-Amin Khalifa Fhimah in late 1991. When Libya refused to hand over the two suspects for trial in a Scottish court, the UN Security Council imposed a ban on air travel and arms sales to the North African country.

The noose around the Libyan economy only tightened further when President Bill Clinton signed the Iran and Libya Sanctions Act in 1996, which imposed sanctions on any international firm that did $40 million or more in oil or gas business with Iran or Libya, or violated the UN sanctions already in place. Several US allies in the European Union protested the move.

Every advanced country is going to have to make up its mind whether it can do business with people by day who turn around and fuel attacks on its innocent citizens by night, Clinton said, shortly after signing the act.

Changing winds

The UN and US sanctions continued unchanged until 1999, when Tripoli released the bombing suspects to the United Nations for trial in the Netherlands. The same day, the UN suspended sanctions.

By the middle of the year, British Foreign Secretary Robin Cook announced the resumption of diplomatic ties with Libya, while the United States was talking with the country for the first time in years. But for every few steps forward, there was at least one step back. In 2001, the USs sanctions act was amended to allow the president to punish non-US firms investing more than $20 million annually in the Libyan or Iranian energy sectors.

The breakthrough in relations between the UN and Libya came when Tripoli accepted responsibility for the Pan Am bombing over Lockerbie and agreed to pay $2.7 billion compensation to relatives of the people killed in the attack. On Sept. 12, the UN sanctions were entirely lifted.

The more damaging US sanctions stayed in place, however, until Libya publicly announced in December 2003 that it was dismantling its chemical and nuclear weapon research programs, and welcomed international inspectors into the country. British Prime Minister Tony Blair said, in a televised address from London, that Qadafi had approached officials from the two Western nations in March to determine if they could resolve the issue of Libyas weapons programs.

Libya has stated that weapons of mass destruction are not the answer for Libyas defense, Blair said. Libyas actions entitle it to rejoin the international community.

Now, most commercial business, investment and trade with Libya is possible, and the United States will no longer punish countries that do business with Libya.

Libya has set a standard that we hope other nations will emulate in rejecting weapons of mass destruction and in working constructively with international organizations to halt the proliferation of the worlds most dangerous systems, according to a White House statement.

Regional stability

It is a bright economic spot in a region that hasnt fared well in the worldwide recession and is continually plagued by stability concerns.

[Easing sanctions] will be a positive thing for Egypt. There are quite a number of Egyptian workers in Libya so the spur-over effect could be good, says C. David Welch, US Ambassador to Egypt. And I dont think the investment in Libya is likely to compete with that for Egypt in a dramatic way. It is a very different kind of market. It is much more limited in what is there, the population is much smaller, the degree of economic interaction with neighbors and others is, so far, limited. On the whole, I think it will likely be a positive benefit. And Egypt generally favors the reduction of tensions within the neighborhood in part of its efforts to expand economic opportunities, which is a logical connection.

But not everyone is sure that easing sanctions in Libya will help stabilize the region.

It will hopefully improve the Libyan economy, but I dont think it will have larger impact on the region. The Americans did Libya, then [placed sanctions on] Syria, so what is the point asks Sharif Elmusa, director of the Middle East Studies Program at the American University in Cairo.

But all Kodaks Ghaffar sees in the future is opportunity.

We started our operations after the 29th of April, when we got word from Eastman Kodak in Rochester [New York] that sanctions were off, he says Well probably go with a soft opening by fourth quarter this year and have strategic business there by 2005. bt