WaPo : Libyan Market Seen As a Bonanza

Libyan Market Seen As a Bonanza

By ELAINE GANLEY | The Associated Press | August 3, 2007

PARIS -- The Libyan army, until now largely stuck with obsolete equipment from the 1970s and 1980s, will soon be getting new hardware: European anti-tank missiles and advanced communications systems.

As an arms deal finalized by European defense group EADS shows, the North African country run by the mercurial Col. Moammar Gadhafi is shedding its status as a pariah and luring Western arms manufacturers with its oil wealth.

EADS announced Friday that it has finalized a contract to supply Libya with anti-tank missiles and said a deal for the purchase of advanced communications systems was on the table.

The new hardware _ reportedly worth some $405 million _ is a small first step in a lucrative industry.

"There is no reason why there isn't a bonanza to be had here," said David Hartwell, Mideast and North Africa editor for the London-based risk assessment publication Jane's Country Risk. "If Libya is able to open up its market efficiently, there is potentially billions of dollars to be made there and, conversely, to be spent."

However, there also are concerns. They range from maintaining the strategic balance in the volatile region to human rights issues to Gadhafi's often bizarre personality and unpredictable tactics.

The announcement of the French contracts follows the freeing of six medical workers serving life sentences in Libya, brokered by European officials. The five Bulgarian nurses and a Palestinian doctor flew out of Tripoli in the company of French first lady Cecilia Sarkozy.

A day later, President Nicolas Sarkozy was in Libya to normalize ties with a host of defense, nuclear and humanitarian accords in his pocket.

The ice broke in 2003 when U.N. sanctions imposed 11 years earlier were lifted after Gadhafi announced he was dismantling his nuclear weapons program. That same year, Libya accepted responsibility for the 1988 bombing of Pan Am Flight 103 over Lockerbie, Scotland, and agreed to pay restitution to the families of the 270 victims.

The next year, Libya paid compensation to families of the 170 victims of the 1989 bombing of a French UTA passenger jet over Niger.

Sarkozy was not the first Western leader to set foot on the soil of a rehabilitated Libya. In May, then-British Prime Minister Tony Blair was present for the signing of an exploration and production contract worth at least $900 million.

Oil money will be crucial in allowing Tripoli to restructure its military, which Hartwell said is in "dreadful shape."

The mainly Soviet equipment sold to Libya in the 1970s is out of order, in the attic or sold to African states. France also sold an array of weapons to Libya, including training aircraft, Mirages and Alouette and Super Frelon helicopters.

"The big question is whether they will go Russian or Western," said Francois Heisbourg, special councilor to the Foundation for Strategic Research.

Of Libya's neighbors, the Algerians have gone Russian, Egypt American, he noted.

Tripoli will have its eye mainly on defensive weapons _ for air, land and sea, said Saad Djebbar of Cambridge University's North African Institute, and "not missiles that could reach Israel."

"Israel is generally concerned that any supplier of weapons to an Arab state can be potentially an adversary in a war with Israel, but in the case of Libya, I don't think now that it is a concrete concern," said Shlomo Brom, an Israeli military expert.

He said the last obstacle was lifted with the return of the medical workers, and Libya "now comes to the Western world with a clean bill of health."

Not everyone agrees.

"There could be concerns that the leopard hasn't changed its spots, considering the role it used to have in arming rebel factions," said Paul Holtom of the Stockholm International Peace Research Institute.

Peter Larsson, a spokesman for Swedish aerospace and defense company Saab AB, said it would be "high-flying speculation" to think his company will now regard Libya as a new attractive market for potential arms sales.

All Saab arms deals require government approval, he said. Libya must respect "human and democratic rights" before any deal goes through, he said.

But officials are sniffing around.

"A lot of people want to hop on the gravy train," Heisbourg said.

Portuguese Defense Minister Henrique Numo Severiano Teixeira was in Libya in May to discuss security and defense in the Mediterranean.

And one French company may have jumped the gun with a Libya contract eight months ago.

Sofema signed an apparently small, but symbolic, contract with Libya in November 2006 for the "flight readiness" of 12 aging French Mirage jet fighters, Sofema President Guillaume Giscard d'Estaing confirmed to The Associated Press. He declined to provide the value of the contract and insisted it has not yet come into force.

Associated Press bureaus in Stockholm, Jerusalem, Madrid, Cairo contributed to this report, along with Jenny Barchfield in Paris.